Bitcoin does not have a CEO but it does have lawyers.
Bitcoin does not have a CEO but it does have lawyers. Currently, cryptocurrency lobbyists and activists are fighting on Capitol Hill to further update the language of the U.S. Senate’s bipartisan infrastructure bill that contains, buried in its 2,000+ pages, a sentence that could derail the entire crypto industry.
To pay off a portion of the $1 trillion spending package – a keystone policy for President Biden’s administration to upgrade American transportation and energy sectors – Senate Republicans have agreed to levy a $28 billion tax on the crypto industry.
But the bill also contains a poison seed. Crypto advocates are working tirelessly to protect the public blockchain industry from political actors that seemingly misunderstand the very industry they’re looking to oversee. And so far, it seems like they’re winning.
“What’s scary about this is the process is so compact,” Kristin Smith, executive director of the Blockchain Association, said. “When you get language like this, and one of those broad packages when you’re only four pages of a 2,700 page bill, you’re scrambling with all of those other interest groups to get the attention of lawmakers.”
In the past week, public interest groups like the Blockchain Association, Coin Center and the newly formed policy team at Coinbase have sent memos, taken meetings and leveraged their insider connections to try to reshape the wording of a quick-moving piece of legislation. A process that’s only made harder by growing concerns around the coronavirus.
Calling the bill “one of the top two policy threats” ever seen by the U.S. crypto industry, Smith said she’s been impressed by the progress made already. Over the weekend, Senate officials softened the language in the bill, turning what could have been cataclysmic into something merely concerning.
Now at stake are a few words in what is rapidly becoming a language game. As Coin Center’s Neeraj Agrawal put it: “We’re trying to change, like, two words in that.”
The proposed “spend-for” in the infrastructure bill would come from expanding the reporting requirements for crypto brokers (think intermediaries like Coinbase and Robinhood) to help prevent tax avoidance.
WE’RE NOT OUT OF THE WOODS YET.
In so doing, the bill also recklessly broadens the definition of a “broker” to conceivably apply to any economic actor working in crypto. This would apply to anyone who is “responsible for and regularly providing any service effectuating transfers of digital assets” on behalf of another person. That means miners, stakers, software developers might be forced to collect identifying information about anyone with whom they interact.
“We’ve had some people say, ‘Oh, that’s not what we’re intending.’ But the problem is the language as written can capture all of those things,” Smith said. “We really need to try to get it changed to match their intent.”
“If you get laws on the books that don’t match well with how technology works in practice, you don’t necessarily get the outcomes that you would like, whether it’s from a public policy standpoint, a political standpoint, or a legal standpoint,” Nelson Rosario, a partner at Smolinski Rosario Law, said.
Few of the policy experts I spoke with are opposed to requiring major cryptocurrency exchanges to report more detailed information to the Internal Revenue Service (IRS). In fact, the largest U.S. exchange, Coinbase, sought clarity on the form in question (1099) as long ago as 2017.
For an industry that has sometimes disagreed on the need for government lobbying capability, the process to amend the bill has seemed remarkably in lockstep. It’s no stretch to say crypto has little political standing on Capitol hill but its voice is being heard.
The Electronic Frontier Foundation put out a statement broadly condemning the privacy concerns of such an understanding of “broker,” while Sens. Pat Toomey and Ron Wyden (not known for his crypto advocacy) have also made statements calling for adjustments.
Although “cautiously optimistic,” Smith notes, “we’re not out of the woods yet.”