The crypto crowd gets loud and proud on Capitol Hill – California News Times

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The US cryptocurrency industry has revealed important new features. It has decisively proved that it can hear itself at Capitol Hill.

Cryptocurrency crowds piped while the U.S. Senate finished the job of President Joe Biden $ 1 trillion infrastructure plan.. In the days before the proposal was passed on Tuesday, the debate stalled as the industry furiously protested the tax filing requirements proposed to crypto “brokers” to help pay all its maintenance costs.

The industry didn’t get what they wanted right away. However, it is still possible, in the meantime the partisan has been fired, suggesting a battle in the capital. Taxation and regulation Cryptocurrency trading can be fierce.

“We need to destroy crypto enemies before they can destroy us,” said Ryan Serkis, CEO of Messari Cryptographic Data Company. Said in a tweet During the debate, he added in an interview that industry supporters want to work to defeat their uncompromising enemies in polls.

The wrath of cryptography was astonishing as the Senate accidentally raised the issue. Its focus was on infrastructure, and the immediate challenge was to find a way to pay for it without raising taxes. This is an exercise that some commentators liken to looking for change under a federal sofa cushion. Going deeper, the Biden administration estimated that the United States could raise $ 28 billion in taxes owed by crypto investors under existing legislation.

That’s where things got tricky. To help ensure that this money is realized, the bill required crypto brokers to issue a customary tax form that reports investment revenues to customers and governments. A broker is defined as a person whose “compensation” (which basically means money) regularly provides “a service that enables the transfer of digital assets on behalf of another person.”

The crypto industry has opposed this definition, claiming that it is very broad and covers everything from crypto miners to software developers working on decentralized finance (DeFi) platforms. Require these people to file tax returns, they said, would drive the industry offshore and reduce income rather than increase it.

The Senate took these complaints seriously. This makes sense given the size of the industry leveling them. Monetary negotiations and cryptocurrency crowds in Washington have a lot of it: Claimed value The number of cryptocurrencies is approaching $ 2 trillion.

Even more surprising, the Senate response included a rival modification made by two bipartisan parliamentary groups. This is strange in today’s divided United States. Both sought to dispel concerns about broker tags being applied to people validating transactions in distributed ledgers. However, there have been concerns in the industry that people working on “proof of stake” networks may be considered brokers. Since it plans to convert to such a system, it can hurt Ethereum, the blockchain that underpins much of DeFi.

Eventually a compromise was agreed, but when Senate leaders asked for “unanimous consent” to submit the proposal without delaying the infrastructure bill, everything went awry. .. One senator, Republican Richard Shelby, opposed a failed bid to force consideration of his amendments to national security.

The infrastructure plan was passed without the changes required by the crypto industry, but its supporters still expressed satisfaction. They felt they were building support to show influence, slow down the legislative process, and change the definition of brokers, perhaps through other laws and regulations.That’s why they secured statement The two drivers behind the bill, Republican Rob Portman and Democrat Mark Warner, have expressed their belief that neither crypto miners nor hardware or software vendors are crypto brokers.

“What we have learned is that cryptography is a force to consider,” said Christine Smith, Executive Director of the Blockchain Association. “Cryptography is more than just an industry. There is an entire network of individuals who build and support those networks. It turns out to be an incredibly organized community.”

But the ultimate political test of this community has yet to come. Warner said in a comment that the United States should not allow “creating a shadow financial system beyond the bounds of established rules to combat illegal finance and tax evasion,” pointing out this challenge. ..

This is a live issue. Much of the work of the crypto community today is in DeFi. It uses so-called smart contracts to replace financial intermediaries that governments rely on to assist in law enforcement.

At some point, the crypto community may face pressure to fill that void. When that day comes, the industry will have to do more than complain. It also has to take responsibility.

gary.silverman@ft.com

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