Senate Finance Committee Chair probes “lack of safeguards” in crypto tax incentives

A new push for clarity on compliance from Senator Wyden aims to ensure economically distressed communities receive promised benefits from crypto mining companies.

Democratic Senator Ron Wyden is digging into the activities of crypto companies that take advantage of tax breaks provided by the Opportunity Zone program.

Senator Wyden’s main concern stems from the perception that some crypto companies may be taking advantage of what he called “a lack of safeguards and transparency measures” in the Opportunity Zone program.

The concerns were raised in letters he sent to two companies and one individual. He wants to understand how they are providing the required reciprocal support for low-income communities as stipulated by the rules of the program.

The Oregon Senator wrote letters to crypto miners Argo Blockchain and Redivider Blockchain and to Opportunity Zone specialist accountant from accounting firm HCVT Blake Christian.

The Opportunity Zone program was implemented in 2017 and designed to offer tax incentives to companies that create jobs and drive private investment into economically distressed communities.

In his letters to Argo and Redivider, Wyden requested information about the extent to which each company is engaged in the Opportunity Zone program and when they began their involvement with it. He also asks them to provide information about how many jobs their operations have created, which is one of the core Common Good contributions the program was made for.

Democratic Senator Ron Wyden is digging into the activities of crypto companies that take advantage of tax breaks provided by the Opportunity Zone program.

Senator Wyden asks Redivider Blockchain about their involvement in the Opportunity Zone program.

Last July, Argo Blockchain CEO Peter Wall specifically stated that the location of his company’s Dickens County, Texas, mining facility was chosen specifically because of its inclusion in the Opportunity Zone and abundance of renewable energy. At the time, he told Cointelegraph that he believed the facility could “reinvigorate the community through the creation of jobs,” which is one of the main concerns of Senator Wyden.

Wyden pulled into question Redivider’s true reason for operating within the Opportunity Zone based on a February 2022 interview with Huffpost in which CEO Tom Frazier said his company “100%” would have opened a mining facility with or without the tax break. Currently, only accredited investors can invest in Redivider’s $250 million Opportunity Zone fund.

To Christian, Senator Wyden requested information about what crypto mining projects in the Opportunity Zone his clients are currently invested in and how many jobs those companies are creating. In this letter, Wyden brought up the same Huffpost interview in which Christian said that his client investors were just “looking for a way to save some money because they’re about to get drilled on short term capital gains taxes.”

This insinuates that his clients may simply be looking for a way to offset short-term capital gains taxes by investing in mining operations that receive a tax break.

There has not yet been a response from Argo, Redivider, or Blake Christian.

Wyden’s new push for clarity in the crypto industry could be signs of what Blockchain Association Executive Director Kristen Smith called a “bipartisan vibe shift on crypto” in the Senate in a March 26 tweet. Based on her analysis, there is now “progressive, libertarian, moderate, conservative, and liberal” support in both houses to take crypto seriously.