Earlier today the US Senate voted on a massive bill that, while labeled infrastructure, included a cornucopia of pet projects and unrelated policy goals. Squirreled away in the legislation was language designed to raise revenue by taxing crypto transactions as well as broadly defining the firms and individuals that participate in digital assets in a way that will undermine blockchain innovation.
While multiple Senators, on both sides of the aisle, attempted to mitigate the harm to the digital asset industry, and a last-minute compromise was embraced by industry advocates, it was not to be and the Senate approved the 2700 page bill with more than a dozen Republicans supporting the largely Democrat crafted bill.
Like a stampeding elephant, the Senate bill on infrastructure would stomp on the nascent cryptocurrency industry just to find a way to pay for 4% of its massive $1 trillion pricetag.
There’s still a $3.5 trillion bill to come.
— David Sacks (@DavidSacks) August 10, 2021
Yesterday, as it emerged that the compromise along with other changes was doomed, the Blockchain Association issued a statement expressing its frustration at the legislative process the barrelled headlong into a deleterious act of policy.
Kristin Smith, Executive Director of the Blockchain Association, stated:
“Washington politics prevailed over common sense today. While we remain hopeful a political roadblock may be moved by tomorrow morning, we’re bracing for next steps. By failing to reach unanimous consent on the Toomey-Warner-Lummis-Sinema-Portman compromise, the U.S. Senate jeopardizes American leadership in financial and technological innovation. As written, the infrastructure bill contains harmful IRS reporting requirements that many in the crypto ecosystem lack the capabilities to comply with. As a result, many crypto players will be forced to move overseas, leaving future jobs and economic growth on the table. However, today’s setback isn’t the end. The Blockchain Association and our 46 member organizations look forward to engaging with members of the House of Representatives to ensure the unclear and unworkable aspects of this provision are removed once and for all.”
Senator Cynthia Lummis, a vocal supporter of digital asset innovation, slammed the legislation and its obtuse approach to the emerging sector of Fintech, criticizing the slapdash bill that was written behind closed doors.
There are some important lessons from this about the antics in Washington. First: This is what happens when bills are drafted behind closed doors without input from experts and stakeholders.
— Senator Cynthia Lummis (@SenLummis) August 10, 2021
Senator Lummis cautioned on the myopic nature of the bill cautioning that “if we keep pressing forward without understanding the implications of our actions, we are going to fall further and further behind China in financial innovation.” Lummis said we must prepare now to counter the “anti-innovation crowd.” Senator Lummis said they will continue to look for ways to fix the harmful language in the bill.
Senator Lummis, along with Senator Kyrsten Sinema, have created the Financial Innovation Caucus to help protect the interests of the US when it comes to Fintech.
The good news is that the legislation must now cross over to the House of Representatives where it will get another review and perhaps some changes. The bipartisan Blockchain Caucus is now gearing up to address the problem and according to a Tweet a letter has been sent to all Representatives
I, along with bipartisan Blockchain Caucus co-chairs @RepDarrenSoto, @RepDavid, and @RepBillFoster sent a letter to every single Representative in the House raising concerns about the Senate infrastructure bill being paid for by our crypto industry. pic.twitter.com/MzsEmBbosr
— Tom Emmer (@RepTomEmmer) August 9, 2021
Congressman Emmer said that “Crypto is not a partisan issue – the bipartisan Blockchain Caucus is working to educate Members so we can fix this dangerous provision when it comes to the House.” The letter agrees that crypto tax reporting is important but states that it must be done correctly instead of created in haste.
Of course, a student of the obvious would note that the language, as it stands now, could be so damaging that the estimated $28 billion raised by taxing crypto may never be as innovators leave and transactions diminish – as people vote with their feet. In the end, you get the government you vote for.