Cryptocurrencies Catch-All Cruises Through Congress

In a blow for the cryptocurrency industry, language which provided for broad oversight of the nascent asset class remained intact and embedded in the US$550 billion infrastructure bill that is making its way to the floor of the U.S. Senate.

Despite vigorous lobbying from the increasingly vocal and influential cryptocurrency and blockchain lobby in the U.S., and bipartisan support from a handful of Congress members, the amendment of language to cryptocurrency provisions in the infrastructure bill was stymied at the Senate.

Under the current bill language, there are concerns that cryptocurrency miners and blockchain software developers would need to reveal their transaction data to the Internal Revenue Service and potentially be taxed on those transactions.

To be fair, software developers who are testing their blockchain applications often use testnets, which don’t transact in actual cryptocurrencies, which are traded on exchanges or sold for fiat currencies.

Where it becomes an issue is when those blockchain applications go to the mainnet and then attract actual cryptocurrencies which have values that can be represented by fiat currencies.

For instance, if a blockchain protocol awards its developers the digital token for that blockchain, the current cryptocurrency provisions in the infrastructure bill could potentially make those awards declarable to the IRS and therefore taxed.

Cryptocurrency miners too, who sell their cryptocurrency from mining activities to fund operations, would now be obliged to declare transactions over US$10,000, increasing their potential tax burden.

In recent weeks, the U.S. cryptocurrency industry had pushed hard to reduce oversight to mainly traders and investors, as opposed to miners and software developers, and also to clarify the bill’s language.

The amendments however are not entirely dead on arrival as the infrastructure bill and the current cryptocurrency provisions are still some ways away from landing on President Biden’s Resolute Desk for signing, as it still needs to be taken up by the House, where changes could still be made.

Quirks of procedure in the Senate have meant that the proposed amendments must be agreed upon by every senator, leading some senators to horse-trade the change of cryptocurrency provisions in exchange for other conciliations.

The Senate is likely to vote on final passage of the infrastructure bill as it currently stands later today before it heads back down to the House and then on to the White House for signing into law.