Controversial Crypto Tax Amendment May Be Fixed in the 11th Hour

Senators across the aisle have come up with a change to the crypto tax reporting amendment in the infrastructure bill.

We may earn a commission from links on this page.
Image for article titled Controversial Crypto Tax Amendment May Be Fixed in the 11th Hour
Photo: Sen. Pat Toomey, R-Pa., and Sen. Cynthia Lummis, R-Wyo., discuss details of a bipartisan agreement to fix the digital asset reporting requirements in the infrastructure bill. (J. Scott Applewhite) (AP)

A bipartisan group of senators led by Cynthia Lummis (R-WY) and Pat Toomey (R-PA) today announced a proposed tweak to a contentious cryptocurrency tax amendment to the sprawling infrastructure bill. The amendment dictates that brokers will be subject to report crypto transactions to the IRS. This relates to infrastructure in that it’s hoped to raise an estimated $28 billion in tax revenue, which would help fund the bill’s proposals.

But many have protested that the text of the last-minute amendment was sloppy and could have crushed individual actors propping up the industry. The definition of a “broker” arguably lumps in developers and miners under the specification. It reads, in part: “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”

Crypto enthusiasts argued that forcing people who aren’t processing trades (miners) to report customer data to the IRS would squash the industry. The resistance fostered a strange alignment of nonprofits, Elon Musk, bipartisan politicians, and the crypto industry. Jack Dorsey mustered troops on Twitter, taking issue with the excess burdens that would stifle growth. The Electronic Frontier Foundation and 15 similarly-aligned nonprofits wrote an open letter to Senators Chuck Schumer (D-NY) and Mitch McConnell (R-KY) arguing that the overbroad amendment would harm privacy by exposing customer data to individuals rather than conventional brokers.

Advertisement

Under the new text, which has not yet been released in full, exchanges like Coinbase and financial services companies would still have to report, but people who don’t execute trades (like miners) would be exempt. All 100 senators will have to agree to pass the amendment, and the Hill reports that it’s up for a vote at some point on Monday. If not, the original, contentious provision stays and goes to the House, which can then make changes.

The amendment has received support from the Blockchain Association (a trade group including Binance, Kraken, ripple, and numerous other trading platforms and financial services groups). The compromise “leaves work to be done, but the Blockchain Association fully supports this improvement to the original language,” it tweeted.

Advertisement

The episode seems to have given senators a crash course in cryptocurrency. Politico reported earlier today that the cryptocurrency industry fought this hard; the Blockchain Association told them that they now have three or four times the number of lobbyists pushing for crypto-friendly legislation, while Square and Coinbase spent large sums on lobbying over recent months. Ted Cruz is your crypto guy now, he’ll have you know.

Gene Simmons is also pleased.