Banking

Inside the Senate’s sudden cryptocurrency showdown holding up the Biden infrastructure bill

  • Two bipartisan Senate gangs are engaged in a last-minute clash over cryptocurrency tax enforcement.
  • The fight is scrambling partisan politics and may provide a glimpse into future crypto regulations.
  • “We’re all working trying to resolve these issues,” Sen. Ron Wyden told Insider.

It’s a Senate fight causing an unusual cast of characters to team up: Jack Dorsey, head of Twitter, Gene Simmons of the rock band KISS, and Elon Musk of Tesla.

Those three are on the same side in an unexpected clash among senators racing to pass President Joe Biden’s $550 billion infrastructure bill sometime early next week.

 

Two bipartisan Senate gangs are dueling in a sudden showdown over cryptocurrency tax enforcement in the legislation. It’s a fight that’s scrambled the partisan politics Congress is usually known for and provides a glimpse into how lawmakers may further regulate the burgeoning trillion-dollar industry.

GOP Sens. Pat Toomey of Pennsylvania and Cynthia Lummis of Wyoming, along with Democratic Sen. Ron Wyden of Oregon are partnering on an amendment to exempt cryptocurrency miners, software developers, and protocol developers from tax reporting requirements because they say they’re unable to produce the information to comply. These miners are individuals and companies who generate digital coins.

The crypto overhaul triggered last-minute pushback from the White House, which sought to preserve the Treasury Department’s flexibility to draft new rules. The Biden administration endorsed a rival amendment on Thursday from Democratic Sens. Mark Warner of Virginia and Kyrsten Sinema of Arizona, and GOP Sen. Rob Portman of Ohio. They said it would lead to greater tax compliance.

The measure would exempt a significant number of actors, but not to the extent the Wyden amendment does. There were few immediate signs of progress on Saturday. But talks are ongoing and could be reaching a critical juncture.

“We’re all working trying to resolve these issues,” Wyden said in an interview Saturday evening. “I continue to feel very strongly I want to crack down on tax cheats and people associated with these centralized programs, crypto exchanges.. I just don’t want to destroy the innovation that comes from a decentralized network.”

Toomey, in an interview on Saturday, said “There are constructive conversations going on.” “I certainly hope we’re gonna get to a resolution because the underlying text is badly flawed and needs to be fixed,” he said. 

Where lawmakers stand on cryptocurrency taxes

Crypto coins circle

crypto coins circle

Nurphoto


Last month, a bipartisan group of senators struck a deal with the Biden administration to include new tax reporting measures on the cryptocurrency industry. It was part of an effort to generate new revenue to finance the infrastructure bill.

But it came under heavy criticism from cryptocurrency investors and advocates who argued it could devastate the industry with onerous information requirements many are simply unable to produce. 

“It has language that would allow Treasury to sweep in vast amounts of all kinds of actors and code that are not brokers in the normal understanding of that word,” Jerry Brito, executive director of the cryptopolicy think-tank Coin Center, told Insider. Brokers allow traders to sell and buy cryptocurrencies.

It prompted Wyden, Toomey, and Lummis to unveil their own version. It’s an unusual coalition with a liberal anxious about government overstepping into the tech world and two conservatives wary of burdensome rules on the financial sector.

It also garnered support from a disparate cast of characters, including Tesla CEO Musk, rock star Gene Simmons and Twitter’s Dorsey, who assailed the new crypto rules.

Then Warner, Portman, and Sinema offered their amendment earlier in the week in a bid to strike a compromise. Wyden suggested he was blindsided by the Biden administration coming out in support of it. “I really didn’t know about any of this as chairman of the [Senate] Finance Committee,” Wyden said.

Some experts say the Warner version would limit Treasury’s ability to levy new rules. “My concern is the Wyden amendment would narrow the field too much and leave too much ambiguity and room for litigation,” Jason Furman, former chief economist to President Barack Obama, said in a recent interview. “Treasury needs flexibility not to have its hands tied.” 

Some lawmakers were still undecided on which amendment to support. Sen. Bill Cassidy of Louisiana, one of the GOP architects of the infrastructure bill, told Insider on Saturday he was “still looking at them both.”

Others like Republican Sen. Kevin Cramer of South Dakota had made up their minds. “I like the Toomey one,” Cramer told Insider, adding he wanted to “shrink the net” that would be cast on the industry. 

Democratic Sen. Jon Ossoff of Georgia jumped into the talks late on Saturday as a possible mediator. 

Portman confirmed Ossoff was playing a role in the negotiations on Sunday. “I’ve been working with colleagues Sens. Warner, Wyden, Toomey, Lummis, Ossoff, Sinema on a potential solution I believe will help reassure stakeholders these individuals will not be considered brokers while maintaining info reporting in this bipartisan legislation,” he said in a floor speech.


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