In the latest U.S. crypto regulation news, the controversial amendment to the Infrastructure Bill was not accepted, and the bill passed, much to the dismay of crypto advocates and the blockchain industry. The Infrastructure Bill included crypto tax regulation that is proposed to raise up to $28 billion, but suffers from nebulous definitions of what constitutes a broker. Despite a last-ditch effort from the crypto community, the bill will now pass on to the House of Representatives. Still, the IRS has sent positive signals to the industry, indicating the damage might not be as bad as expected.
U.S. crypto regulations pass despite agreement about weaknesses
It all started when Sen. Rob Portman (R-Ohio) sparked an outcry among the crypto community with his provision to the bill, which included a wide interpretation of “brokers”, namely anyone facilitating the transfer of digital currencies for another person. Advocacy groups quickly sprung into action and managed to convince Senators Ron Wyden (D-Ore), Cynthia Lummis (R-Wyo.), and Pat Toomey (R-Penn.) to sponsor a better-formulated amendment. It excluded miners, nodes, and validators and limited the definition of brokers only to centralised exchanges.
An intense discussion in the Senate ensued, with Senators Mark Warner (D-Va.) and Kyrsten Sinema (D-Ariz.) supporting a competing amendment that had the backing of the White House and the Treasury Department. Even though their competing amendment still included unclear language, eventually, a compromise was reached that all senators supported and had the backing of crypto advocacy groups.
Despite a valiant battle, crypto proponents had to see the contentious amendment getting passed, when a single holdout, Richard Selby, a Republican representing Alabama, refused to support the amendment over a lack of, entirely unrelated, defense contracting provision. Despite Selby acknowledging the problematic language, Senate passed an amendment no one considered sensible.
U.S. crypto regulations – what now?
So far, no significant damage has been done. The bill will make its way to the House and will not be picked up before fall. Already, reactions to the amendment have ranged from outrage to tacit acceptance. Don Tapscott, the co-founder of the Blockchain Research Institute, called the amendment “a mistake that could bring great harm to innovative financial technology being pioneered in the U.S.”
Pat Toomey, who co-sponsored the failed rival amendment, said that it “imposes a badly flawed, and in some cases unworkable, cryptocurrency tax reporting mandate that threatens future technological innovation.”
However, the U.S. Treasury Department may not want to go after crypto entities that don’t meet the tax code’s definition of a broker, according to anonymous sources from department officials. That would assuage voices in the crypto community that fear the bill could inflict lasting damage on the future of crypto companies and the industry as a whole in the U.S.
Regardless of what happens in the House, the crypto community has already shown that blockchain technology is here to stay and that crypto users are growing in political influence. The speed and organisation of the grassroots-backed reaction to a poor attempt at more U.S. crypto regulation showed that politicians will have to do a better job at getting up to speed with the latest technological developments.