Crypto Headlines $1T Infrastructure Bill, New Reporting Requirements Looming
Bipartisan "Crypto Senators" fighting hard for Bitcoiners
What does Bitcoin have to do with building roads and bridges? More than you would think, apparently. When the US Senate drafted up a bill to spend $1 trillion on infrastructure projects, over a ten-year period, they took the responsible path of actually trying to pay for it. That’s where cryptocurrencies come in. New tax reporting requirements for those in the crypto space are expected to bring in a total of $28 billion in new tax revenue over ten years. That’s right. The “crypto provisions” are expected to fund just 2.8% of the spending plan.
What Reporting Requirements, and What’s the Big Deal?
The bill contains provisions for companies in crypto to report transactions to the IRS such as sales of crypto assets, payments to other parties, and holdings on exchanges. This is similar to what is required of investment firms and brokerages, where sales of stocks, dividends and interest are reported to the IRS each year. But the provisions went much farther.
The bill requires more than just reporting of crypto sales by exchanges. It broadly expands the definition of just who is a crypto “broker.” It mandates reporting by cryptocurrency software developers, miners and decentralized finance operations, many that operate on a peer-to-peer basis with little human control. Worse, many of the reporting requirements call for filing of information that these players don’t even have.
In short, the crypto provisions in the bill are an overreach, drafted by US Senators with little knowledge at all of the cryptocurrency industry.
Crypto World Fights Back, and “Crypto Senators” Rally Support
The crypto community was not about to take this lying down, and some big names rallied their followers to fight back against the bill. Jack Dorsey of Twitter and Square called on his 5.6 million Twitter followers to push back and contact their senators. Even Gene Simmons of Kiss reached out to his fans to support amendments to the bill.
Groups like the Blockchain Association and Coin Center, a cryptocurrency think tank, pushed back as well. Their lobbying efforts have been backed by some of the biggest players in the space in recent years. Square spent $440,000 on lobbying in just the second quarter of this year, and Coinbase, the massive exchange, spent $80,000 in the same quarter.
The lobbying efforts apparently won over Ron Wyden, the top Senate Democrat in charge of writing tax legislation. Wyden teamed up with Sen. Cynthia Lummis (R-WY) and Sen. Pat Toomey (R-PA) to draft an amendment that would exclude software developers and crypto miners from the definition of “broker.” Another coalition, led by Sens. Mark Warner (D-VA), Rob Portman (R-OH) and Kyrsten Sinema (D-AZ) came up with provisions that would amend the definition but have fewer exclusions.
It is worth noting that Treasury Secretary Janet Yellen pushed back against the amendments proposed by the Wyden team, fearing that her hands would be tied in future rule-making involving cryptocurrencies.
Sen. Ted Cruz’s Impassioned, Common Sense Plea:
Sen. Ted Cruz (R-TX) made a last-ditch effort to stop this crypto crackdown and give the issue more time and debate. He cited the relative lack of knowledge about crypto among those in Congress, saying:
“Let’s recognize if we gathered all 100 senators in this chamber and asked them to stand up and articulate two sentences defining what in the hell a cryptocurrency is, that you would not get greater than five who could answer that question.
“Given that reality, the barest exercise of prudence would say we shouldn’t regulate something we don’t yet understand. We should actually take the time to try to understand that. We should hold some hearings, we should consider the consequences.
“We shouldn’t destroy people’s lives and livelihoods from complete ignorance.”
No Fairy-tale Ending:
There was still opportunity for an amendment, right up until the last minute before the vote, but by senate rules, it would require unanimous support. It almost got it. One US Senator, 87 year-old Richard Shelby from Alabama, would not give his support because he wanted another $50 billion in the bill for defense spending. (Shelby receives gobs of money from defense contractors.) So, he doesn’t get what he wants, no one else will either. Incidentally, Shelby’s defense spending request was blocked by one senator as well, Bernie Sanders from Vermont.
The infrastructure bill, without any amendments, passed the Senate, 69-30. It now moves on to the House of Representatives for their vote, where changes were not expected. However, Rep. Anna Eshoo (D-CA) has asked Nancy Pelosi to amend the provision in the Senate’s bill, narrowing the definition of broker. The House will take up the matter when it returns in late August, with a vote expected in September. Stay tuned.
One positive result of the crypto lobbing effort, according to Jeff Hauser, who tracks corporate lobbying for the Revolving Door Project:
“Crypto’s success with Wyden is one of the most fascinating D.C. influence developments of 2021, and one I suspect other industries will be studying throughout the rest of the decade.”
My Take: As for the United States Senate focusing so much on Bitcoin and crypto, win or lose, cryptocurrencies have arrived. I agree with the old adage - “There’s no such thing as bad publicity.”
Bitcoin Price Surge!
From July 20th to August 11th, Bitcoin’s price jumped from $29,360 to $46,465. That’s an increase of 58% in three weeks. The supply shortage is real, as weaker hands are selling into stronger, long-term holders. As Ferris Bueller said, “Life moves pretty fast….”
This Week in Bitcoin History: Bitcoin.org
On August 18, 2008, the domain name bitcoin.org was registered by Bitcoin’s first developers Satoshi Nakamoto and Martti Malmi, according to the site. The latest domain renewal was made anonymously on November 24, 2019. The site remains one of the top educational resources for people to on-ramp to Bitcoin. Link: Bitcoin.org
Issue No. 16, August 13, 2021
Rick Mulvey is a CPA, forensic accountant and crypto consultant. He writes about all things Bitcoin, and yells at the Yankees and Giants. He also runs marathons and makes wine, neither professionally.
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