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Amendment to fix cypto tax provision fails ahead of Senate infrastructure vote

Pat Toomey, Cynthia Lummis
Sen. Pat Toomey, R-Pa., and Sen. Cynthia Lummis, R-Wyo., discuss details of a bipartisan agreement to fix the digital asset reporting requirements in the infrastructure bill, at the Capitol in Washington, Monday, Aug. 9, 2021. (J. Scott Applewhite/AP)

Amendment to fix cypto tax provision fails ahead of Senate infrastructure vote

August 09, 01:40 PM August 09, 05:55 PM

An amendment to fix a cryptocurrency tax provision in the bipartisan infrastructure package that those in the industry fear could be devastating was blocked on Monday despite the efforts of a bipartisan group of lawmakers.

The amendment to the infrastructure plan was announced on Monday morning after much debate over the past week and was planned to be added using unanimous consent in the Senate. But Sen. Richard Shelby ended up blocking the addition Monday afternoon after a dispute over military funding in the bill. The loss is, in essence, a death blow to the effort.

Cryptocurrency advocates say that the original language as it now stands, which expands IRS tax-reporting requirements, could hamstring blockchain software developers, cryptocurrency miners, and other parties.

The revenue-raising provision would apply fresh IRS reporting requirements to cryptocurrency brokers, which lawmakers predict would bring about $28 billion in revenue. The new Monday amendment narrows the definition of a broker so as not to include miners, developers, and validators, according to a copy of the text reviewed by the Washington Examiner.

“Our solution means a broker means only those persons who conduct transactions on exchanges where consumers buy, sell, and trade digital assets,” Sen. Pat Toomey of Pennsylvania, the ranking Republican on the Banking Committee, said during a news conference after the agreement for the fix was unveiled.

BIPARTISAN PLAN TO RAISE REVENUES FROM CRYPTOCURRENCIES FACES IMPLEMENTATION OBSTACLES

Toomey introduced the amendment with GOP Sens. Cynthia Lummis of Wyoming, Rob Portman of Ohio, and Democratic Sens. Mark Warner of Virginia and Kyrsten Sinema of Arizona as co-sponsors. Sen. Ron Wyden, an Oregon Democrat, was absent from the agreement after being involved in discussions on the matter.

Toomey said that while he doesn’t think it is an “absolutely perfect solution,” it is a major improvement from the underlying text of the infrastructure legislation.

During remarks at the news conference, Lummis praised Wyden for his work on the issue. She said that while he is not yet signed on to this amendment, he does agree that it is a step in the right direction but would like the amendment to go further.

Lummis said that the technology involved in cryptocurrencies is moving at such a fast pace that Congress will likely have to revisit the matter within the next year. The lawmakers said that the amendment has the backing of the Treasury Department.

If it passes, the amendment will bring a sigh of relief for advocates of cryptocurrencies.

Greg Zerzan, a shareholder at Jordan Ramis and former acting assistant secretary of the Treasury, told the Washington Examiner that Monday’s proposed change is an improvement over the previous language because it narrows the definition of brokers and, in turn, who the new tax reporting requirements will apply to.

“A better course of action would be to remove the entire provision until Congress has the opportunity to legislate on the topic with more deliberation,” he said. “But given the unlikelihood of that happening, this amendment at least demonstrates that policymakers are aware of the challenges of legislating in this space.”

The amendment came after a long week and weekend of discussion on the matter. Twitter CEO Jack Dorsey and Tesla CEO Elon Musk, both heavy hitters in the cryptocurrency realm, dinged the original text of the bill in recent days. Dorsey said that the initial language would drive digital asset development and operation outside the country.

“If we can’t strike the entire provision so we can have proper hearings and deliberation, then let’s simplify the definition of broker to what really matters: where digital assets are exchanged for fiat currency,” he said on Saturday evening.

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The news comes amid a broader debate about cryptocurrencies and how they should be regulated. Last week, Securities and Exchange Commission Chairman Gary Gensler said that Congress should give his agency more regulatory power over digital assets to “prevent transactions, products, and platforms from falling between regulatory cracks.”

The price of Bitcoin on Monday soared to levels not seen in months, with its value growing more than 5% to nearly $46,000. Ethereum was up 5.8% and Ripple was up 5.3% as of Monday afternoon.

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