Crypto community denounces ‘catastrophic’ new amendment to Biden’s big infrastructure bill – TechCrunch
Biden’s main bipartisan infrastructure plan has touched a rare Republicans-Democrats cooperation deal, but his proposed changes to cryptocurrency regulations are stumbling the bill.
The administration intends to pay $ 28 billion of its planned infrastructure spending by strengthening tax compliance in the historically under-regulated area of digital currency. This is why cryptocurrency is appearing in a bill that mainly concerns the reconstruction of bridges and roads.
Outreach critics of the legislation argue that the Bill’s effort to do so is sloppy, particularly one that would declare anyone “responsible for and regularly providing any service performing digital asset transfers” such as a broker, subject to the tax reporting requirements.
While this definition may be simpler in a traditional corner of finance, it could force cryptocurrency developers, businesses, and even anyone who mines digital currencies to collect and report user information, which, from by design, is not even possible in a decentralized financial system. .
Now a new amendment to the critical spending package is threatening to make matters worse.
In a joint letter on the text of the bill, Square, Coinbase, Ribbit Capital and other stakeholders cautioned against “financial oversight” and unintended impacts on cryptocurrency miners and developers. the Electronic Frontier Foundation and Fight for the Future, two privacy-conscious digital rights organizations, also criticized the bill.
Following an outcry from the cryptocurrency community, a pair of influential senators proposed an amendment to clarify the new reporting rules. Finance committee chair Ron Wyden (D-OR) opposed the bill, proposing an amendment with fellow finance committee member Pat Toomey (R-PA) that would change the wording of the bill.
The amendment would establish that the new statement “does not apply to people developing blockchain technology and wallets,” removing some of the ambiguity from the bill on the matter.
“By clarifying the definition of broker, our amendment will ensure that non-financial intermediaries such as miners, network validators and other service providers, many of whom do not even have the personal identifying information necessary to file a 1099 to the IRS, are not subject to the reporting requirements specified in the bipartite infrastructure package, ”Toomey said.
Wyoming Senator Cynthia Lummis also supported the Toomey and Wyden Amendment, as did Colorado Governor Jared Polis.
“Choosing the winners and the losers”
The drama does not end there. While negotiations around the bill are ongoing – the text could be finalized over the weekend – a pair of senators have proposed a competing amendment that is not winning any fans in the crypto community.
This amendment, by Sen. Rob Portman (R-OH) and Mark Warner (D-VA), would exempt traditional cryptocurrency miners who participate in energy-intensive ‘proof of work’ systems from the new financial reporting requirements, while keeping these rules in place for those who use a “proof of stake” system. Portman worked with the Treasury Department to draft the cryptocurrency portion of the original infrastructure bill.
Rather than requiring an investment in hardware (and energy bills) capable of solving increasingly complex mathematical problems, proof-of-stake systems rely on participants’ financial participation in a given project, by locking a portion of the cryptocurrency to generate new coins.
Proof of stake is emerging as an attractive, more climate-friendly alternative that could reduce the need for heavy calculations and huge amounts of energy required for proof-of-work mining. This makes it all the more puzzling that the last amendment would specifically allow evidence of mining work to get away with it.
Some popular digital currencies like Cardano are already built on a proof of stake. Ethereum, the second largest cryptocurrency, is migrating from a proof of work system to a proof of stake system to help scale its system and lower fees. Bitcoin is the most remarkable digital currency that relies on proof of work.
The Warner-Portman Amendment is touted as a “compromise,” but it’s not really halfway between the Wyden-Toomey Amendment and the existing bill – it simply introduces new issues that many advocates for. cryptography see it as a new existential threat to their work.
Prominent members of the crypto community, including Jack Dorsey, founder of Square and Bitcoin booster supported the Wyden-Lummis-Toomey amendment while calling the second proposal misguided and damaging.
The executive director of Coincenter, a crypto think tank, called the Warner-Portman Amendment “catastrophic. Coinbase CEO Brian Armstrong echoed this language. “At the 11th hour, @MarkWarner proposed an amendment that would decide which core technologies are acceptable and which are not in crypto,” he tweeted. . “… We could end up with the Senate deciding what types of crypto will survive government regulation.”
Unfortunately for the crypto community – and the promise of the proof-of-stake model – the White House is apparently influence the Warner-Portman amendment, although that could change as late-breaking negotiations continue.