Tax reporting proposal creates a defining moment for the cryptocurrency industry.
A small section of the $1 trillion infrastructure bill has generated a frenzy of lobbying from the cryptocurrency industry, marking a defining moment in the industry's Washington presence.
Despite the fact that industry participants were unable to amend problematic language in a new tax reporting requirement for cryptocurrency brokers in the Senate version of the bill, they remain optimistic that House members will address their concerns. This confidence is spurred in part by the outpouring of support for the business from citizens who called senators' offices to urge them to amend the phrasing.
Industry supporters argue that the Senate version of the bill's definition of a broker is overly wide, requiring software companies who don't have the necessary client information to comply with the law to submit such information for tax purposes.
Even if they wanted to, these workers wouldn't be able to access such client information due to the decentralised structure of cryptocurrencies. As a result, some businesses may be forced to operate in the grey area or relocate their operations outside of the United States.
While the Treasury Department might still define the term more narrowly, some worry that leaving too much to chance from one administration to the next will leave too much to chance. Advocates for the industry say they favour fair taxation and seek tax reporting instructions, but the existing phrasing falls short.
Though the provision has served as an unwanted wake-up call for the business, it has also solidified the industry's political clout in Congress. Fight for the Future, a digital rights organisation, said it received more than 40,000 calls to Congress before of the Senate infrastructure vote.
“Even though this language has been negative for the industry, it has been a positive in that it has brought everyone together and demonstrated that crypto understands how to exert some level of influence in Washington,” said Kristin Smith, executive director of the Blockchain Association, an industry group. “I believe it is the first time that lawmakers have taken cryptocurrency seriously on a large scale, so we are able to have a different level of discourse than we have in the past because they are aware that so many of their people are interested.”
The influx of messages to the Senate, according to Evan Greer, director of Fight for the Future, is “the biggest outpouring of grassroots energy that I have seen in my entire career as a digital rights activist other than net neutrality and the SOPA strike,” referring to the protests against the Stop Online Piracy Act in 2011.
And lawmakers took notice.
“I was getting messages from Senate offices asking, ‘What is this all about?'” says the senator. We're getting a lot of calls,' Greer said.
Now, nonpartisan leaders of the Blockchain Caucus in the House are attempting to figure out how to proceed, as it has become evident that House leadership intends to pass the infrastructure bill without modifications.
Rep. Darren Soto, D-Fla., a co-chair of the Blockchain Caucus, said in an interview that he plans to introduce two legislation that would mirror the Senate's proposed revisions to change the broker definition. Those amendments failed to pass the Senate, and since amendments are unlikely to pass the House, Soto intends to pass the bills through the reconciliation process. Speaker Nancy Pelosi has stated that the infrastructure bill should be voted on by the House on September 27.
In comparison to the Senate, the House benefits from a strong, long-standing Blockchain Caucus, which has about 30 members and is well-established in the chamber.
Some blockchain companies have increased their lobbying efforts in recent quarters, while financial filings for the most recent quarter, which includes the infrastructure vote period, are still unavailable. However, according to second-quarter reports, the Blockchain Association raised its spending by 23 percent to $160,000 over the previous quarter. From the first to the second quarter, the Chamber of Digital Commerce, which represents a mix of IT and finance firms, increased its lobbying budget by more than 100%, spending $62,000 in Q2.
Soto says that the amount of attention given to the cryptocurrency provision in Congress demonstrates how far the business has progressed.
“It demonstrates it's arrived from a market standpoint,” he said. “Right now, senators and powerful House members are debating how to best implement the provision. It's no longer an afterthought, and it's no longer a niche technology. It's currently one of the most contentious issues as we prepare our infrastructure proposals.”
“For a long time, this technology and community were rejected as a hobbyist sector or that ‘crypto is simply a speculative asset with no practical use case,' but I believe that has changed,” said Perianne Boring, president of the Chamber of Digital Commerce. “And I believe that more people are beginning to recognise the importance of this technology for the future of our economy, and they are taking it more seriously.”
