The US crypto bill has failed in its entire battle against “brokers”, but it still has a long way to go before it can be implemented

Wu Shuo Author | Tan Shu

Editor of this issue | Colin Wu

Compared with the other side of the ocean where a document "knocked down" an industry, the definition of "broker" in the United States is undergoing complex debates and struggles, and there is still a long way to go before final implementation.

The Problem with Cryptocurrency Industry Statement in the Infrastructure Investment and Jobs Act

On August 10, the U.S. Senate passed the Infrastructure Investment and Jobs Act (1) by a 69-30 majority. The bill has attracted the attention of cryptocurrency industry practitioners because it involves the taxation of cryptocurrencies. The bill explicitly requires cryptocurrency "brokers" to report transaction information to the tax authorities, and the definition of brokers is "any person who facilitates digital asset transactions on behalf of others." It is estimated that in the next ten years, the cryptocurrency sector will generate $28 billion in tax revenue.

However, the definition of "broker" in cryptocurrency transactions in the bill seems too broad in the eyes of the cryptocurrency industry. For example, a miner is obviously a person who facilitates digital asset transactions on behalf of others, but it is obviously unrealistic to require miners to collect information on both parties to the transaction. This is why some lawmakers proposed amendments.

Amendment based on cryptocurrency “brokers”

Therefore, several senators, including Ron Wyden, Cynthia Lummis and Pat Toomey, proposed the [Wyden-Lummis-Toomey Amendment](2). These senators have a relatively professional understanding of cryptocurrencies, and Cynthia Lummis even holds Bitcoin. The amendment makes a wide range of exclusions for cryptocurrency "brokers". This amendment has also received joint [support] from industry organizations such as Coinbase, Square, and Coin Center(3).

However, not long after the Wyden-Lummis-Toomey Amendment was proposed, several other senators, Rob Portman, Kyrsten Sinema, and Mark Warner, proposed the [Warner-Portman Amendment](4), which only excluded two types of "brokers", namely POW miners and private key software providers. In comparison, this proposal seemed to lack understanding of the cryptocurrency industry, and thus attracted widespread opposition within the industry.

Subsequently, the main sponsors of the two amendments (except Ron Wyden) reached a compromise and formed a new amendment, which was based on the Wyden-Lummis-Toomey amendment, but only removed the part that exempted "digital assets and their core protocol developers" from being considered brokers. However, due to time constraints, the amendment required unanimous consent from senators to pass.

The plan was initially opposed by Senator Richard Shelby from Alabama, and was therefore declared a failure.

Implementation of the Act

Next, the bill will be submitted to the House of Representatives for discussion in September. Generally speaking, bills passed by the senators will not encounter much resistance in the House of Representatives. However, four congressmen led by Tom Emmer have sent an open letter to other congressmen, [calling on] (5) the congressmen to revise the vague definition of "broker" in the bill.

After the House of Representatives passes this bill, the IRS will start to formulate detailed implementation rules for the submission of relevant information, which will be another long process. Therefore, even if the bill is passed according to the current wording, the IRS still needs to resolve the definition of "broker". If highly decentralized organizations such as miners and non-custodial wallets are regarded as exchanges and forced to collect and report trader information, these participants will inevitably be "driven out" of the United States, which may not be what policymakers want to see. (Headline from Market Realist)

[1]:https://www.congress.gov/bill/117th-congress/house-bill/3684

[2]:https://www.finance.senate.gov/imo/media/doc/Wyden%20Lummis%20Toomey%20Crypto%20Amendment.pdf

[3]:https://twitter.com/coincenter/status/1422975878678597640

[4]:https://www.scribd.com/document/519105640/Portman-Sinema-Amendment

[5]:https://twitter.com/RepTomEmmer/status/1424845416697323522

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