Who is a crypto broker and who is not? The US Senate is debating the definition of this term. The consequences for the crypto industry could be devastating.
Two camps in the US Senate are arguing over the course of crypto regulation. The White House under President Joe Biden has become noisy CNBC recently put on the side of the stricter approach.
Specifically, the current debate is about a crypto-related provision within Joe Biden’s prestige project: an infrastructure program worth a trillion US dollars. Among other things, this provides for raising 28 billion US dollars through the taxation of crypto transactions. The law, however, does not want to introduce a new tax. Instead, all “crypto brokers” should report their sales to the tax authorities in the future.
This is where the stumbling block lies. Because for crypto-friends: inside the term “broker” is not defined concretely enough. They fear negative consequences for blockchain developers: inside and other companies that actually have nothing to do with processing transactions. After all, they are not even able to submit the required report.
On August 7th, the US Senate will vote on the infrastructure program. Then two competing additions to the crypto paragraph will also be on the agenda. It should be noted that the Biden administration remains dependent on the funds from the crypto addition to finance the program.
Ron Wyden’s group calls for protection for the crypto industry
On one side of the debate is the crypto-friendly draft by Democratic Senator Ron Wyden and the two Republicans: Pat Toomey and Cynthia Lummis. Your amendment of August 4th calls for a clear definition of the term “broker”. Validators, miners, hardware and software developers and protocol developers would thus be explicitly excluded from the reporting obligation. Wyden said:
Our amendment clarifies that the reporting requirement does not apply to people who develop blockchain technology and wallets. This will protect American innovation while ensuring that those who buy and sell cryptocurrencies are paying the taxes they already owe.
Joe Biden advocates toughness
That stands a suggestion of Republican Rob Portman and Democrat Mark Warner and Kyrsten Sinema. Only miners and the manufacturers of wallets would be exempt from the reporting requirement. The original, vague formulation of the “crypto broker” provision also comes from Portman.
While the crypto lobby went on alert, Joe Biden apparently backed the Portman proposal. His spokesman, Andrew Bates, announced on August 5th:
The government is pleased with the progress that resulted in a compromise tabled by Senators Warner, Portman and Sinema to advance the bipartisan infrastructure package and clarify the measure to reduce tax evasion in the cryptocurrency market.
The Biden administration is still convinced that the proposal will promote compliance and tax justice in the crypto area. CNBC provides a different explanation for the government’s course: After Republican Senators successfully fended off planned tax increases, the tougher crypto regulation remains one of the few vehicles to finance the ambitious infrastructure program.
Crypto associations are taking to the barricade
In crypto and blockchain circles, however, the proposal by Portman and Co. does not meet with much approval. Kristin Smith of the US-American interest group Blockchain Association warned of “disastrous” consequences for the industry. The version favored by the Biden administration is “hostile to technology and innovation.” The hurdles in compliance drove developers out of the country.
Senator Cynthia Lummis also found clear words for the supplementary proposal of her opponents: inside.
Our change request protects both the miners and the hardware and software developers. The other doesn’t. The choice is clear.
so lummis via Twitter.