This has been a bumpy week-“shocking”, a cryptocurrency veteran called it. One saw U.S. Senator Ted Cruz and Senator Ron Wyden working together on behalf of the cryptocurrency and blockchain industries—albeit a failed cause. These events may eventually pave the way for future regulatory success, although it may not appear to be the case now.
To recap: the Biden administration’s $1.2 trillion infrastructure bill was supposed to be about roads and bridges, but as the Senate vote approaches, it has also become a cryptocurrency tax. As the bill added a clause at the last minute, some crypto advocates warned that this could have dire consequences, and these changes could drive BTC miners out of the United States and hinder future blockchain development.
“This will be an amazing loss for the United States and our ability to maintain the world’s innovation center,” warn Venture capital firm Anderson Horowitz.
The senators on both sides reached a final compromise, which temporarily brought hope, but any subsequent amendments to the bill require unanimous approval by the Senate. According to reports, Richard Shelby of Alabama rejected this effort because it did not include his amendment to $50 billion in military expenditures — completely unrelated to crypto taxes.
Therefore, the infrastructure bill was passed in the Senate on Tuesday, and its proposal to generate $28 billion in tax revenue from encrypted transactions is basically intact. At the same time, the definition of “broker” is subject to reporting regulations so extensively that it may ( Possibly) include crypto miners, software developers, node verifiers, and even those who create non-fungible tokens or NFTs.
Nothing is lost
Thinking further, the sky may not fall down. The legislation will now be moved to the U.S. House of Representatives. The House of Representatives will have its own priorities and amendments, and the implementation timetable is about two and a half years away, so anything can happen. The crypto industry may even gain some long-term advantages from the turbulent events that week.
“The developments in the past week have been very positive,” Peter Hans, managing director of digital asset management company Arca, told Cointelegraph, adding: “Now Congress has firmly grasped this, which means they are starting to learn energy beyond exhaustion. The narrative of efficiency and ransomware payment.”
However, Matt Hougan, chief investment officer of crypto index fund provider Bitwise, told Cointelegraph that the industry must still be vigilant because the wording in the bill is “wide enough to cause major damage.” Even though it is not necessarily “guaranteed that there will be terrible results,” he continued to add:
“Part of the content is ambiguous, and the worst consequences are unlikely to stand in court. However, in some ways, it may indeed have major consequences, stifling innovation and restricting the development of this industry in the United States.”
Rocco Marchiori, CPA and vice president of risk management at Blockware Mining, told Cointelegraph: “Many things are at risk.” “Everyone working in this field wants to be clear”, especially “clear definition of brokers” because of the law The prescribed brokers will have reporting requirements that exceed those required by traditional brokers. Coinbases in the world are preparing to submit a 1099 tax. Marchiori said that the form is required, but it is not a developer or transaction validator.
Hans said: “Yes, the bill has been passed in the Senate in the original, very vague language, and is on its way to the House of Representatives,” Hans said, but the House of Representatives will make adjustments and then settle with the Senate.” So nothing is final.” Either way, Hans added:
“[Senator Robert] Portman knew the intent of the language very well, as [U.S.] Treasury [Department], So the realization of the final language has almost no chance to become the harsh description you see in the media. ”
Zachary Kelman, managing partner of Kelman PLLC and general counsel of Cointelegraph, said: “There will be no implementation before the end of 2023.” In addition, he doubts whether these troublesome language and flawed definitions will come to this point.
Grassroots efforts “beyond everyone’s expectations”
Despite the setbacks in the Senate, the crypto industry may not go home empty-handed. “It’s not entirely a waste of effort,” said Winston Ma, an adjunct professor at New York University School of Law and author of The Wall Street Journal. Digital Warfare: How China’s Technological Power Shapes the Future of Artificial Intelligence, Blockchain and Cyberspace, Tell Cointelegraph. “When the IRS writes detailed guidance and implementation rules, the arguments of the crypto industry reflected in the legislative record may affect the interpretation of the IRS.”
There were also some weird things this week, including the spectacle of a US senator reaching a compromise on the bill’s cryptocurrency tax provisions across party lines, which is rare today. “Ultimately, US regulators hope to take reasonable protective measures to promote innovation and growth. For real institutional investment, we need to see the clarity of regulation. This is the first step,” Hans said.
Hougan added: “The debate on cryptocurrency hinders the $1 trillion bipartisan infrastructure bill, which proves that people are increasingly aware of the importance of this industry to the future of the United States,” continued: “In fact, The ability of the crypto industry to assemble on such a rapid and large scale to influence the political agenda is of great significance for the future.”
It was stated last week that “this is a global group, and we cooperate quickly and effectively,” Marchioli said, while Hans added that the mobilization of the crypto industry and its lobbying power “is grassroots, which makes everyone feel Accident.” “
“Yes, there are exaggerations, politics and lobbying are always the case,” Hans continued, “but it can serve as a catalyst to strengthen Washington’s lobbying efforts. It also acts as a catalyst, making politicians realize that they care about assets very much. The category of voters, and this is completely non-partisan. To be honest, I don’t see any real negative effects.”
Kelman commented that “the crypto community is becoming a political factor”, and any number of U.S. senators have not forgotten that if they take a stand, they may now attract considerable social media attention to themselves — or even just comments — -Development of encryption and blockchain. “When was the last time any Republican received positive attention on Twitter,” Kelman said, adding that Ted Cruz almost became the hero of the cryptocurrency on Twitter this week.
The Senate is about to pass legislation, which is terrible for cryptocurrencies.
Infrastructure transactions contain dangerous clauses that undermine encryption and blockchain innovation.
Supporters of cryptocurrency need to speak out. https://t.co/iXrcnne0tV
— Ted Cruz (@tedcruz) August 7, 2021
Marchiori said that cryptocurrency juggling may even be a teaching moment for the country’s top legislator. “This is also for us. We don’t usually participate in politics. It’s encouraging to see senators interested in what we are doing. Also, it is bipartisan in nature.”
Consider the bigger picture
It is also easy to overlook the fact that the Infrastructure Act contains provisions that are vital to American society-of course, it includes a large part of the crypto and blockchain communities. As John Wu, the president of blockchain developer Ava Labs, said in a statement to Cointelegraph: “Infrastructure costs are greater than cryptocurrency and DeFi. Although this tax reporting measure has always been controversial, it supports a wise The infrastructure bill is still in the best interests of the industry, and the bill will improve the physical and digital world for everyone in the United States.”
In addition, this can be said to be just a small conflict on the battlefield of a larger conflict. “In the war on how cryptocurrencies will – or won’t – be regulated, the front has just begun,” Ma told Cointelegraph, adding:
“Of course, you will see the crypto industry use its time-tested power to fight another day-the SEC’s enhanced review of securities laws and other challenges facing the industry.”
Overall, “Encryption and blockchain technology are at an important moment in the transition from proof-of-concept to mass adoption,” Hou Gen told Cointelegraph. “It is at this stage that regulators usually pay attention to disruptive industries. It is also at this stage that progressive regulation can bring significant new economic growth and benefits to society.”
“This is a critical moment for the crypto industry,” Ma agreed: “Now that the legislators have succeeded or failed to persuade the lawmakers to decide whether regulation will allow the digital gold rush to accelerate or slow down.” Hougan concluded: “The past week has been very exciting. Shocked” and added:
“Two years ago, people referred to cryptocurrencies as tulip bulbs. Two days ago, several US senators were debating the complexity of the proof-of-work and proof-of-stake consensus mechanism. It would be an understatement to say that we have come a long way. “