Capitol Hill negotiators released their 2,702 page bipartisan infrastructure bill on Sunday night after a flurry of revisions over the weekend.
One of the more significant last-minute edits concerns cryptocurrencies.
The measure could bring in billions in revenue, but “this is not a new tax on cryptocurrencies,” Perianne Boring, founder and president of the Chamber of Digital Commerce, told Yahoo Finance.
Boring and others in the industry support the general idea of regulations to ensure crypto traders pay their fair share, but they say they need the language to be clearer. They mounted a last-minute lobbying push over the weekend that apparently succeeded in scaling back at least some of the new powers IRS could have if the bill becomes law.
Progress had been made but the industry needs more, Boring says.
“We have been working on multiple iterations of the language of this bill,” she said. As the legislation reads now, it still could be confusing and potentially damaging to the industry, she added.
The effort in Washington comes after other revenue-generating ideas in the infrastructure negotiations – like increasing IRS powers to chase down tax cheats – dropped out of the bill. Senators then turned to cryptocurrency for other tax sources. The new rules could bring in as much as $28 billion, senators say, and are likely to disrupt the industry to help to pay for the $550 billion in new spending allocated for roads, bridges, lead pipe removal, and broadband access.
The question is how disruptive the rule changes will be if the deal becomes law later this year.
The debate centers around the definition of a "broker" in the context of cryptocurrency trades. A range of brokers such at Robinhood (HOOD) and Coinbase (COIN) offer platforms for individual traders to buy and sell cryptocurrencies. Brokers collect personal information about their clients and keep a record of transactions for reporting to the government when needed.
People in the crypto industry object to what they describe as an overly broad definition of brokers in the proposed legislation. The fear is that crypto companies on the technical side, such as node operators or other "non-financial intermediaries," would get caught up in the new reporting requirements and would be unable to comply.
‘Bringing clarity to these requirements is good for business’
The late-stage insertion of these provisions comes after months in which Washington wrestled with how to regulate cryptocurrencies. IRS Commissioner Charles P. Rettig testified in April and pushed for more IRS authority when it comes to taxing crypto.
The issue is also one the Sen. Rob Portman (R., Ohio) has been working on closely for months. Portman, along with Sen. Kyrsten Sinema (D., Ariz.), is a lead negotiator of the just unveiled package.
If the deal survives both the Senate and House and reaches President Biden’s desk, Rettig appears likely to get his wish in at least in some form.
“Bringing clarity to these requirements is good for business,” says Boring, whose group represents scores of companies involved in cryptocurrency. But she added a warning that the new powers – if applied inappropriately – “could have a pretty devastating impact on the development of this technology in the United States.”
The bill is currently being considered by the Senate. It is open for final amendments this week with backers hoping to move toward a final vote by the weekend.
‘The process is not over’
Crypto industry supporters appear to have a key ally in Sen. Pat Toomey (R., Pa.), the powerful ranking member on the Senate’s Banking, Housing and Urban Affairs committee. In a statement Monday, Toomey said he’ll attempt to tighten the language further.
He said the tax requirements in the current bill could still apply to non-financial intermediaries who “never take control of a consumer’s assets and don’t even have the personal-identifying information needed to file a 1099 with the IRS.”
Toomey said the current text is “unworkable” and plans to offer an amendment to fix it before the final vote.
Boring echoed Toomey, saying “the process is not over” as the back and forth appears set to continue this week. Regulation of cryptocurrencies “really deserves a sophisticated and a dedicated and a thoughtful public policy process,” she added.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.