a16z writes to the US government on infrastructure bill, calling for amendments to crypto tax regulations

Original title: "A16z's open letter to the US government: Encrypted networks can repair the existing system. Don't let policy flaws sacrifice our future."

The U.S. government is looking to raise revenue through cryptocurrency taxation. A new bipartisan $1.2 trillion infrastructure bill in Congress intends to raise about $28 billion from cryptocurrency tax enforcement measures as one of its funding mechanisms. In tax enforcement actions, the Internal Revenue Service (IRS) will require digital asset-affiliated entities to report any of their transactions involving digital assets.

On August 4, in response to this move, the well-known Silicon Valley venture capital firm Andreessen Horowitz (a16z) published an open letter calling for amendments to the bill. a16z stated that the decentralized cryptocurrency network provides an extraordinary opportunity for the United States and we cannot sacrifice tomorrow's economic opportunities because of a flawed bill.

The following is the full text of the open letter:

Dear Majority Leader Schumer and Minority Leader McConnell.

We write to express our support for the bipartisan amendment on infrastructure proposed by Senator Wyden, Senator Lummis, and Senator Toomey.

We share the Senators' concerns that the existing provisions for taxing cryptocurrency transactions are too broad, will sweep up non-intermediaries such as network validators and software developers, and will stifle innovation by imposing unworkable reporting requirements on these groups. The infrastructure bill is too important to leave it open to future legal challenges based on its existing text. This bipartisan amendment should be the right solution to address these concerns in a simple way.

As leaders of the largest cryptocurrency venture fund, we are encouraged that the government recognizes that this emerging industry exists and is only growing.

Cryptocurrencies and blockchain have a lot of untapped potential for different groups — from musicians, artists and other creators to small business owners and those who have been excluded.

An appropriate regulatory strategy needs to reflect an important fact: cryptocurrency is not a single thing. The cryptocurrency world extends far beyond its financial origins to include art, community development, and new ways to form organizations. These use cases will only continue to grow as entire new economies are built on decentralized protocols, just as the internet was built on protocols like TCP/IP, and regulation must reflect the nuance that different cryptocurrency uses will require different rules of the road.

Decentralized cryptocurrency networks offer the United States an extraordinary opportunity to promote open systems and societies rather than closed ones, power economic growth, and create jobs.

If this bill passes as is without the amendments, it will be the exact opposite of what this infrastructure legislation is meant to accomplish. We cannot sacrifice tomorrow's economic opportunities because of a flawed bill that needs one simple fix.

In a world where the internet is increasingly controlled by a few, a decentralized web is a credible path forward. Meanwhile, China has made a huge bet on its government’s centralized control of the next wave of financial and computing infrastructure. Our country can offer an alternative: building participatory and inclusive infrastructure that works better for everyone.

We firmly believe that cryptocurrency will enable society to harness the full potential of digital transformation and realize the unrealized promise of our current system.