NEW: Cryptocurrency advocates rally for second push to fix Infrastructure tax provision that poses major threat
Story on the Washington Examiner website here: Cryptocurrency advocates rally for second push to fix tax provision that poses major threat
Cryptocurrency advocates are lobbying to change the House version of the bipartisan infrastructure package after lawmakers and the industry failed to fix a controversial tax provision in the legislation that passed the Senate Tuesday.
The advocates already had some success in garnering bipartisan support in the Senate for their proposed changes to the legislation. Still, they fell short when Republican Sen. Richard Shelby of Alabama used a procedural maneuver to block the amendment to add military funding to the underlying infrastructure package instead.
The revenue-raising provision in the infrastructure package they want to change is estimated to bring about $28 billion into the government coffers by imposing new IRS tax-reporting requirements for cryptocurrency brokers, rules that many in the digital coin industry fear could cripple its growth and innovation.
Currently, the legislation has a broad definition of cryptocurrency brokers that includes centralized exchanges, such as Coinbase or Robinhood, and blockchain software developers, cryptocurrency miners, and node operators.
The cryptocurrency industry and its advocates say their aggressive efforts to change the language of the Senate bill last week will pay off in their similar push in the House.
“Thanks to our efforts in the Senate, now the trap has been sprung, and we’re already pretty organized and prepared to do what’s needed, so there’s much more hope we’ll succeed this time,” said Neeraj Agrawal, director of communications at Coin Center, a cryptocurrency policy think tank. “We’re quickly trying to frame our position by making calls to hundreds of congressional offices, lobbying directly, doing email outreach, and through digital ads and messaging."
He added that the senators who crafted the cryptocurrency language in the infrastructure package did not intend to define cryptocurrency brokers as anyone outside of digital coin exchanges.
Choksi said key members of the Biden administration, such as Treasury Secretary Janet Yellen, also support changing the bill's language.
Cryptocurrency advocates say their efforts to lobby the House have been successful so far.
“Several House members have been in favor of our changes, so we’re feeling somewhat optimistic, and there has been no particular opposition at the moment,” said Kristin Smith, executive director of the Blockchain Association. Cryptocurrencies such as Bitcoin and Ethereum are built upon blockchain technology.
She added that the impression pushed by critics that the cryptocurrency industry and users don’t want to pay their fair share in taxes is “completely unfair” and “misinformation."
Since 2014, the IRS requires cryptocurrency users who sell their digital coins for a profit to pay capital gains taxes on the value of their coins' appreciation.
Members of both parties in the House Congressional Blockchain Caucus support changing the cryptocurrency provisions of the infrastructure package.
The caucus sent a letter Monday to all House representatives raising concerns about the Senate infrastructure bill being paid for by the cryptocurrency industry.
“We’re lock and step with the cryptocurrency industry in terms of clarifying the language on who is and isn’t broker and making it less broad. I’m in support of the changes they want,” Republican Rep. David Schweikert of Arizona told the Washington Examiner.
Schweikert is one of the co-chairs of the blockchain caucus.
Democrats also favor lowering the regulatory burden imposed by the infrastructure bill on the cryptocurrency industry.
“Cryptocurrencies need to be taxed fairly. But any regulation should not ensnare software developers or miners and should not pick winners and losers by having separate rules for proof of work and proof of stake,” Democratic Rep. Ro Khanna of California told the Washington Examiner. Khanna is also a member of the blockchain caucus.
Despite the bipartisan agreement to amend the cryptocurrency provisions of the infrastructure package, Schweikert said the industry needs to learn quickly how politics and policymaking in Washington happens.
“Showing up at this moment when all hell breaks loose and they’re on the chopping board is a communication failure of the industry, just at the time that Congress sees them as easy money to capture,” Schweikert said. “There was definitely a certain level of miscalculation regarding the regulatory threat to the industry, and now it seems to be going through a maturing process."
Cryptocurrency advocates say the battle over relevant language in the infrastructure package has made them aware of their shortcomings.
“Many in industry now realize that we need more resources to prevent such issues from occurring again in Congress,” said Smith from the Blockchain Association.
“There will soon be more money, more trade associations, more Washington offices, and more people employed to tackle these issues,” she added.