Crypto advocates are up in arms over a clause in US President Joe Biden’s trillion-dollar infrastructure bill that could paint a less than rosy future, as it inches closer to approval.
If passed, the bill would require all brokers of digital assets to report on cryptocurrency trading gains. Wider data on the sector would help the US Internal Revenue Service to ensure greater tax compliance for levies such as capital gains tax.
But critics have argued the existing language for the bill’s crypto regulation is too vague and broad, potentially bringing in those who mine and validate cryptocurrency tokens under its remit. The bill is on track for a Senate vote early this week, which if approved would then send it to the US House of Representatives.
Multiple amendments on the crypto tax provision have flown back and forth in an attempt to assuage concerns, with little success.
Twitter and Square co-founder Jack Dorsey said on 8 August that the bill would create “an impossible ask” in documentation for many in the crypto industry that would tarnish the US’ reputation as a financial leader.
One of the clause’s original authors, Republican senator Rob Portman, said on 8 August that the existing language was enough to make select groups “clearly exempted” from the tax provision.
“The concern has been expressed that some in the cryptocurrency industry who are not brokers could be inadvertently caught up in this definition,” said Portman, in comments reported by Politico.
“The Treasury Department, the nonpartisan congressional joint committee on taxation and others believe that the current language is clear, and that the reporting requirements only cover brokers.”
The battle in Washington comes as financial watchdogs globally attempt to develop and pass efficient cryptocurrency regulation.
The UK’s Financial Conduct Authority is pushing ahead with its cryptoasset taskforce on the matter, while the EU’s proposed Regulation on Markets in Cryptoassets (Mica) is going through early readings in the European Council and Parliament.
An amendment to Biden’s bill that would further define a “broker” to exclude crypto validators, hardware and software makers and network developers has struggled in the Senate due to scheduling concerns but gained widespread support from the community.
“Our position as the global financial leader is a privilege, not a right. Other countries have a head start on us in the development of digital assets. If we get this wrong, we handicap ourselves and put our future prosperity at risk,” said Republican senator Cynthia Lummis, one of the amendment’s three authors, on 8 August.
“We’re at an impasse,” she added. “I understand my colleagues’ positions. But real people are going to be hurt if we do not change the language in this bill.”
Tyler and Cameron Winklevoss, co-founders of crypto exchange Gemini, said on 8 August that the growing concerns validate the rise of digital assets as a legitimate industry.
Crypto prices remained resilient over the weekend despite the ongoing legal battles, with bitcoin reaching $45,300 — its highest point in almost three months — on 7 August, before losing some of those gains. The token was down 3% in the last 24 hours to $43,670 as of 9am BST on 9 August.
Galaxy Digital chief executive Mike Novogratz said on 9 August he believed the tussle in Washington was proof of crypto’s need to remain decentralised from government intervention.
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