Last month, the White House and Senator Rob Portman, Republican from Ohio, agreed to a proposal to require increased tax compliance for cryptocurrency brokers as a way to help pay for the bipartisan infrastructure bill. The deal came under intense criticism from cryptocurrency investors, who have argued it would give the Biden administration sweeping powers to virtually cripple the growing field of cryptocurrencies.
It was also rebuked by Wyden, Senator Patrick Toomey, Republican from Pennsylvania, and Senator Cynthia Lummis, Republican Wyoming, who are pushing an amendment to the infrastructure bill intended to prevent the Biden administration from applying the new rules to a wide swath of actors in the cryptocurrency ecosystem.
Some senators had hoped to pass the bipartisan bill on Thursday night, but the debate bogged down and the cryptocurrency fight remained one of the unresolved issues.
On Thursday night, as the impasse between Wyden and the White House appeared to deepen, Portman and Senator Mark Warner, Democrat from Virginia, offered a competing amendment as a potential compromise. The Warner-Portman measure would exempt more cryptocurrency actors from greater regulation than the initial proposal, but fewer than Wyden, Toomey, and Lummis wanted. The White House said publicly late Thursday it is supporting the Portman-Warner effort, as it would do less to limit the executive branch’s new authorities over cryptocurrencies.
A Treasury spokeswoman declined to comment on Yellen’s private conversations.
‘’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,’’ White House spokesperson Andrew Bates said in a statement provided to The Washington Post.
The issue has divided senators during the final dash to finish crafting a $1 trillion bipartisan infrastructural proposal, and has the potential to imperil already tenuous support among lawmakers for the bipartisan infrastructure package.
The episode also reflects the extent to which cryptocurrencies — which have emerged as a trillion-dollar industry from obscurity less than a decade ago — have already begun to upend politics in Washington.
The Senate is adjourned until Saturday, when lawmakers will try to reach a compromise and pass the infrastructure bill.
The initial plan that set off the controversy, crafted by Portman with the help of Treasury Department officials, is aimed at increasing tax compliance in the purposefully opaque cryptocurrency sector. Estimates have found it would raise roughly $28 billion over 10 years — funding that is crucial for paying for the broader infrastructure package.
The proposed cryptocurrency changes consist of two key parts. One would include digital assets such as crypto in requirements to report payments worth more than $10,000 to the Internal Revenue Service. That idea has generated little controversy.
The second part would clarify the definition of a broker for players in the cryptocurrency market, which would require them to file a type of 1099 form for transactions on certain kinds of digital assets.
Cryptocurrency industry groups are largely open to extending 1099 reporting requirements to established crypto trading brokers, such as Coinbase, a publicly traded exchange platform for cryptocurrencies. But they have alleged that the legislation as written would also give the Biden administration authority to require the same of bitcoin ‘’miners’’ who are crucial for validating transactions on the decentralized network, as well as software developers and others. Industry groups have warned that software developers and miners do not have the capacity to send 1099s to the IRS, because intrinsic to cryptocurrencies’ function is that these kinds of producers have no knowledge of who their users are.