Infrastructure bill inches closer to passage as crypto industry fears disastrous impact on future of tech

• Cryptocurrency supporters including Brian Armstrong and Elon Musk have criticized the proposed crypto tax regulation in the Senate’s infrastructure bill.
• Aiming to raise $28 billion for infrastructure planning through crypto taxes, the bill is a step closer to passage after being pushed for by senators.
• A recent amendment to the proposal would lead to increased tax compliance in the blockchain and crypto industry. 

The Biden administration introduced an infrastructure bill that would aim to raise at least $28 billion in taxes from cryptocurrencies. Digital asset service providers would need to report users that are holding digital currencies. There have been two amendments to the proposal, one supported by the crypto community and another backed by Biden. 

Crypto advocates slam proposed digital asset tax rules

The $1.2 trillion bipartisan infrastructure package is inching close toward its passage, and crypto advocates have criticized a new provision added to the bill. The administration has set its sights on tightening crypto tax compliance and raising $28 billion to pay for its infrastructure spending. 

Companies including Square, Coinbase and Ribbit Capital slammed the bill and warned that there could be unintended impacts and “financial surveillance” for cryptocurrency miners and developers.

Senators Ron Wyden (D-OR) and Pat Toomey (R-PA) also proposed an amendment to clarify the reporting regulations, pushing back against the bill and requesting to modify the proposal’s language. 

The amendment would clarify that individuals developing blockchain technology and wallets would be included in the bill. The senators hope that miners, network validators and other service providers would not need to report to the Internal Revenue Service (IRS), according to the requirements stated on the package. Senator Cynthia Lummis (R-WY) also showed her support behind the amendment, as well as Colorado Governor Jared Polis.

Senator Rob Portman (R-OH) and Mark Warner (D-VA) have sparked fear in the crypto community as the pair proposed an amendment that would exempt traditional miners participating in proof-of-work systems. 

However, those who are using proof-of-stake (PoS) would still be required to conduct financial reporting to the IRS. PoS systems only rely on participants entering a financial stake in a blockchain network.

Coinbase CEO Brian Armstrong commented that the government is “trying to pick winners and losers in a nascent industry today” and that they would be “guaranteed to get it wrong.” Armstrong further wrote on Twitter to ask senators to support the Wyden-Lummis-Toomey amendment and keep the crypto industry thriving. 

Although Armstrong agrees that US citizens should pay their taxes, he believes that the government views the digital asset industry as a source of tax revenue that could destroy “exciting innovations in the process.”

Elon Musk also commented on the bill, calling the legislation hasty and saying that now is not the time for lawmakers to “pick technology winners or losers.”

Following the weekend of haggling over amendments over crypto regulations, the deal has arrived in a 68-29 vote, which could see it passing the late night on August 9 or in the early hours on August 10.