As the result of the extreme backlash, Senators have finally clarified a part of the Infrastructure Investment and Jobs Act that would severely overtighten cryptocurrency regulations, which is a move that had seemed to anger the lawmakers, entrepreneurs, and many others who were concerned about the regulations detrimental effects on the newly emerging sector of the market.
An extreme provision of the $1.2 trillion, 2,700-page package would have changed the Internal Revenue Code by bringing forth a “return requirement for certain transfers of digital assets not otherwise subject to reporting.” The section seemingly defined “digital asset” as “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology.”
The newly drafted amendment, which was proposed this past Monday by Pat Toomey (R-PA) and Sen. Cynthia Loomis (R-WY) and co-sponsored by Sen. Mark Warner (D-VA), and Sen. Rob Portman (R-OH), would seek to modify the definition of “broker” so that multiple software developers and the validators of transactions would no longer be subject to the brand new requirements.
In a statement, lawmakers explained:
There’s broad agreement that digital asset exchanges behaving as brokers should be required to report transactions just like other kinds of brokers already do. There is also concern that tax evasion and non-compliance are becoming significant issues surrounding cryptocurrencies and digital assets. Some have expressed confusion concerning the underlying text of the infrastructure bill, suggesting it would result in the application of reporting requirements far too broadly and ensnare individuals, developers, and other elements of this ecosystem that could not comply with a reporting mandate.
While we each would have drafted this solution differently, we all agree it’s important to ensure that these obligations are properly crafted to apply only to entities that are regularly effectuating transactions of digital assets in exchange for consideration.
The provision, which initially had many worried, would have almost singlehandedly hamstrung the use of cryptocurrencies (such as bitcoin, ethereum, and dogecoin) in the United States.
“There are a few key moments that define our future,” stated Brian Armstrong, the CEO of Coinbase, in a tweet. “One is happening now in the Senate w/ the infrastructure bill. At the 11th hour @MarkWarner has proposed an amendment that would decide which foundational technologies are OK and which are not in crypto. This is disastrous.”
1/ There are a few key moments that define our future. One is happening now in the Senate w/ the infrastructure bill. At the 11th hour @MarkWarner has proposed an amendment that would decide which foundational technologies are OK and which are not in crypto. This is disastrous.
— Brian Armstrong (@brian_armstrong) August 6, 2021
“If the U.S. fails to embrace the innovation happening in crypto, it risks becoming a financial backwater, missing out on one of the fastest-growing sectors of the economy,” he stated. “Imagine if we had missed out on the internet, and the largest internet companies had been built overseas.”
“This debate in the Senate started because the govt sees the growing crypto industry as a source of tax revenue. We agree everyone must pay their taxes. There is no debate on this topic. But destroying some of the most exciting innovations in the process is unconscionable.”