White House backs senators calling for stricter crypto reporting rules

The White House weighed in – somewhat out of the blue – in a controversial battle over competing crypto amendments to the $ 1,000 billion infrastructure bill. He was chosen to support the side that is not so friendly to the bitcoin and ethereum world.

The fight is over a provision in the bipartisan bill, which raises funds through stricter tax rules on cryptocurrency transactions. Crypto advocates argue that the wording of the legislation, which requires digital asset brokers to report crypto trading gains, is vague and too broad. And now, amendments are circulating to narrow the scope.

On Wednesday, Senators Ron Wyden, D-Ore., Pat Toomey, R-Pa., And Cynthia Lummis, R-Wyo. introduced an amendment that deepens the definition of a “broker”, explicitly excluding validators, hardware and software manufacturers, and protocol developers. It would be a victory for the crypto caucus, if it passes.

In the other camp is Sens. Rob Portman, R-Ohio – who drafted the original tax provision – with Mark Warner, D-Va. and Kyrsten Sinema, D-Arizona. They submitted their own rival amendment on Thursday. CNBC does not have a copy of the proposed Portman-Warner Amendment.

But based on the previous revisions outlined by Portman, some believe this will leave the door open to a broader definition of ‘crypto broker’ and potentially subject more crypto investors to these higher taxes.

No one expected President Joe Biden to offer his take on it, but on Thursday night, the White House officially backed Portman’s amendment in a statement attributed to Deputy Press Secretary Andrew Bates.

“The administration is pleased with the progress that has resulted in a compromise sponsored by Senators Warner, Portman and Sinema to advance the bipartisan infrastructure package and clarify the measure to reduce tax evasion in the crypto market. currency, ”Bates wrote.

“The administration believes this provision will strengthen tax compliance in this emerging area of ​​finance and ensure that high-income taxpayers contribute what they owe under the law. We are grateful to President Wyden for his leadership in pushing the Senate to address this issue, however we believe that the alternative amendment proposed by Senators Warner, Portman and Sinema strikes the right balance and takes an important step forward in promoting tax compliance. “

The last-minute approval of the Portman Amendment was unexpected but not surprising.

Since its inception, the White House’s vision for the infrastructure bill has been one in which businesses and the wealthiest Americans would fund improvements that would benefit everyone.

But Senate Republicans have a different idea, and over the past three months, they’ve cut tax hikes one by one.

The crypto reporting rules and their associated taxes represent the last vestiges of the corporate tax increases that were supposed to foot the bill.

If Portman’s side wins, Blockchain Association executive director Kristin Smith warns the ramifications will be far-reaching and extremely damaging to the country’s crypto industry.

“At the eleventh hour, Senator Warner tabled an amendment that is anti-technology and anti-innovation – and would be disastrous for the US crypto ecosystem,” Smith wrote.

“The removal of protections for software developers – what Senator Warner’s amendment seeks to do and which is defined in the Wyden-Lummis-Toomey amendment – is a negative catalyst that will force the development and innovation of the cryptography outside of the United States to more tech-friendly, technology-friendly jurisdictions, “Smith continued.

The flashback to White House approval of the Portman-led amendment was swift and brutal. Wyden, a liberal Democrat, and Lummis, a conservative Republican, both backed down, with Lummis issuing a direct call to action.

“We need you,” Lummis tweeted. “Please call your Senators. Please tweet. Please email. We are facing major headwinds on the Wyden-Lummis-Toomey Amendment. Bury financial innovation in the bureaucracy and send developers + miners to collecting information in search of information they don’t know is a horrible policy. “

The Senate plans to vote on the bipartisan infrastructure bill on Saturday.

– CNBC’s Tanaya Macheel contributed to this report.