Controversial new cryptocurrency tax requirements are likely to become law through the bipartisan infrastructure bill. The cryptocurrency community rallied to fix the language, but the House voted to proceed with the bill as is on Tuesday, moving forward without any new amendments or opportunities to change it.
On Tuesday, House Speaker Nancy Pelosi (D-CA) and a group of moderate Democrats reached a deal to approve a $3.5 trillion budget resolution, schedule floor action on the bipartisan infrastructure deal by September 27th, and advance voting rights legislation. The agreement comes after a group of moderate Democrats pledged to vote down the multitrillion-dollar social safety net package if it was approved before the bipartisan infrastructure bill.
However, the deal also prohibits any new amendments from being considered to the infrastructure package unless the House approves a new rule that would allow them.
The deal strikes a devastating blow to the cryptocurrency community that spent the last few weeks working to remove language from the infrastructure package that could extend burdensome tax reporting requirements to wallet developers and miners. Several amendments were proposed in the Senate earlier this month, but they ultimately failed, leaving the problematic language in the final bill.
“We’re disappointed but not surprised,” Neeraj Agrawal, Coin Center communications director, told The Verge. “It was always a long shot. That said, we have opportunities over the coming months to get this fixed in legislation.”
Several House lawmakers, like Reps. Ro Khanna (D-CA) and Anna Eshoo (D-CA), opposed the bill’s broad definition of “broker” and the bipartisan Congressional Blockchain Caucus sent a letter to members of Congress calling for a fix.
Still, cryptocurrency advocates may have a chance to influence how the rules are applied. The Treasury Department has reportedly said that it would issue new guidance on the rules once they’re passed, ensuring that it would provide exemptions to firms that do not operate as brokers. But it’s unclear if Treasury Secretary Janet Yellen would support more industry-friendly rules. In an interview with CNBC earlier this year, Yellen called Bitcoin an “extremely inefficient” asset.
She continued, “It is a highly speculative asset and you know I think people should be aware it can be extremely volatile and I do worry about potential losses that investors can suffer.”
The Treasury Department has sought to calm cryptocurrency advocates, telling reporters that it would not interpret the “broker” language as including miners or developers. Still, many cryptocurrency advocates argue that the promise is not enough and that future administrations could reinterpret the bill’s underlying definition more broadly.
“I appreciate that it seems to be Treasury’s intention to get this right, and we look forward to engaging in any regulatory process in the years to come,” Jerry Brito, Coin Center executive director, said in a tweet Wednesday. “But please don’t accept the narrative that folks in crypto are overreacting about this provision.”
As the House moves forward on the infrastructure package, national security officials are raising the alarm that the cryptocurrency language could force illicit cryptocurrency transactions underground, according to The Wall Street Journal on Wednesday. More regulation could “push illicit use and criminal actors deeper into anonymizing methods and corners of the internet that would make it more difficult for law enforcement,” Jeremy Sheridan, US Secret Service investigations office assistant director, told the Journal.