The Senate goes to war against crypto taxes | David Z. Morris

The fight in the US legislature over new cryptocurrency tax reporting requirements in the Biden administration’s massive infrastructure bill has continued to get weirder. After industry objections to an initial flawed proposal, there are now two competing amendments on how to reduce its demands. According to the Washington Post, the dispute now blocks the entire $ 550 billion bill.

We’ll get into the details, but first, take a moment to think about it here. For those of us who have been around for a while, the fact that everything crypto-related has become the linchpin of such a key piece of legislation is a huge benchmark, especially since the technology is only ten years old.

Now, stop slapping yourself on the back, because I think the house might be on fire.

It all started last week when lawmakers added new reporting requirements for cryptocurrency brokers as part of the “pay” of the infrastructure bill. But the language was so broad and flawed that it could have involved cryptocurrency miners, software developers, and other entities who are clearly not “brokers” in a significant sense. To be clear, the objection to the provision was not that it would impose taxes on crypto, but that the reporting requirements were technically flawed.

Things appeared to be improving on Wednesday when Senators Pat Toomey (R-Pa.), Cynthia Lummis (R-Wy.) And Ron Wyden (D-Ore.) Tabled a fine-tuning amendment and reduce Defining a broker’s rule, including exclusions for node validators (miners), software developers, and wallet developers. This amendment, while flawed, received a lot of praise from industry figures including the Chief Strategy Officer of CoinShares. Demirors Meltem and Jerry Brito of the Coin Center lobby group.

From this moment of hope, the situation quickly deteriorated.

A second proposed amendment to the tax was introduced last night by the original writers of the provision, Rob Portman (R-Ohio) and Mark Warner (D-Va.), Joined by Kristen Sinema (D-Ariz.). University of Chicago tax expert Daniel Hemel reviewed the two proposals last night and found the main difference to be the Warner-Portman-Sinema amendment. is narrower. It specifically protects proof of work minors and wallet developers, but not protocol developers.

As Hemel observed, it seems very strange that the U.S. government would write legislation favoring proof-of-work mining (e.g. bitcoin), given the widely recognized need to explore at least more consensus algorithms. eco-friendly. This certainly contradicts the recent commitment of SEC Chairman Gary Gensler to be “technologically neutral.” Not that Gensler had any formal power in this process, but you might think he had some influence as a knowledgeable regulator.

I’m speculating here, but the exclusion of proof of work might be based on a misconception that PoW is somehow inherently and consistently more decentralized than proof of stake systems. Depending on the language of the draft, there is also another, more fun option. The Portman-Warner-Sinema tweak creates an exception for entities “validating distributed ledger transactions through proof of work (mining)”. One way to read the line is for someone to think “proof of work” and “mining” are the same thing.

To be clear, I find this funny in a very dark and depressing way.

The worst news is that support for the still fundamentally broken Warner-Portman-Sinema version of the Amendment is worryingly strong. The White House issued a supporting statement. Treasury Secretary Janet Yellen has also reportedly lobbied for the wrong version. This would seem to support rumors that the Treasury was involved in the development of the original language, perhaps as a shortcut to imposing reporting requirements on which it had already worked.

Meanwhile, the generally pressured environment around the bill leaves little time for nuanced debate and education. A vote on the full bill is now expected on Saturday.

There will be some tiny but crucial new developments on the layout today, likely before I even publish this article. Personalities, including Senator Lummis, ask public pressure to support his version of the provision, and that is perhaps the most important factor in what happens next. So if this is important to you, call your Senator. This Fight for the Future tool makes it easy (h / t in Meltem).

I’ll close by emphasizing again how mind-boggling the situation is – and dare I say it, bullish as a whole. This massive bill is one of the signing pieces of legislation for the new Biden administration, one of the things that should cement some sort of bigger legacy. And he is disturbed by a prolonged fight for magic money on the Internet.

In other words: we did it, fam. We just have to keep it.