A debate over competing amendments to regulate cryptocurrency is creating a new hurdle for the Senate to complete work on a $1.2 trillion bipartisan infrastructure bill.
An amendment offered by two Republicans and the Democratic chairman of the Senate Finance Committee has stirred controversy and provoked opposition from the White House.
The amendment, which would carve out exemptions from the cryptocurrency reporting requirements outlined in the infrastructure bill, is sponsored by Senate Finance Committee Chairman Ron Wyden (D-Ore.) and Sens. Cynthia Lummis (R-Wyo.) and Pat Toomey (R-Pa.).
The White House supports a different amendment put forward Thursday by Sens. Rob Portman (R-Ohio), Mark Warner (D-Va.) and Kyrsten Sinema (D-Ariz.). It has more narrow exemptions on the proposed regulations of the industry.
“The Warner-Portman-Sinema amendment provides a government-sanctioned safe harbor for the most climate-damaging form of crypto tech, called proof-of-work. It would be a mistake for the climate and for innovation to advance this amendment,” Wyden tweeted.
The infrastructure bill lays out reporting requirements for cryptocurrency that would help fund the roughly $1 trillion bill. The requirements could raise $28 billion over 10 years, according to the Joint Committee on Taxation.
But cryptocurrency companies and industry groups raised concerns that the broad definition of “broker” in the bill would also impose requirements on so-called cryptocurrency miners.
The industry pushback led to the competing amendments that differ on how they would clarify the definition of “broker” in the infrastructure bill, carving out different exemptions for who the reporting requirements would apply to.
“I think we’re at an impasse,” Toomey told reporters Thursday.
The amendment from Wyden, Toomey and Lummis would clarify the definition of broker to mean only people who conduct transactions on exchanges where consumers buy, sell and trade digital assets. The amendment’s definition would offer broader exemptions from cryptocurrency regulation, leaving out reporting requirements for miners.
The proposal, though, is opposed by the Biden administration. The Washington Post reported that Treasury Secretary Janet Yellen lobbied Wyden about the matter, and spoke with lawmakers Thursday to raise objections to the effort led by Wyden.
The Warner, Portman and Sinema amendment would instead amend the bill more narrowly to create exemptions for “proof-of-work” miners.
Proof of work is a widely used method in cryptocurrency, including bitcoin, for validating transactions and mining new tokens. It requires members to solve a math puzzle to validate transactions. But emerging competitors to bitcoin may require less energy-intensive, decentralized methods for validation that could fall subject to the reporting requirements based on the Warner, Portman and Sinema amendment.
White House spokesperson Andrew Bates said the administration supports Warner, Portman and Sinema’s amendment, which “strikes the right balance.”
“The Administration believes this provision will strengthen tax compliance in this emerging area of finance and ensure that high income taxpayers are contributing what they owe under the law. We are grateful to Chairman Wyden for his leadership in pushing the Senate to address this issue, however we believe that the alternative amendment put forward by Senators Warner, Portman, and Sinema strikes the right balance and makes an important step forward in promoting tax compliance,” Bates said in a statement.
The cryptocurrency industry, however, broadly supported the Wyden amendment, and is bashing the alternative that the White House is supporting.
The Blockchain Association tweeted Thursday urging supporters to call their senators to vote “yes” for the Wyden, Toomey and Lummis amendment, and the association released a statement Wednesday including more than 100 stakeholders in the cryptocurrency ecosystem urging Senate leaders to support it.
The association’s executive director, Kristin Smith, called the alternative Senate proposal “terrible.”
A spokesperson for the venture capital firm Andreessen Horowitz also said the Warner, Portman and Sinema amendment would be a “stunning loss for America and our ability to remain the innovation epicenter of the world.”
“The proposed amendment recklessly imposes an unworkable reporting requirement on the shoulders of software developers and proof-of-stake blockchain validators,” the spokesperson said in a statement.
