Senate Republicans struck a deal Wednesday with Senate Democrats and Biden on their $1.2 trillion “infrastructure” bill. To offset the cost of the mammoth legislation, lawmakers proposed a tax on cryptocurrencies, such as Bitcoin and Ethereum, that could raise $30 billion.
The legislation would require that any broker that transfers any digital currencies would need to file a tax return under a “modified information reporting regime.”
The proposal defines a digital asset as any “digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the [Treasury] Secretary.”.
Kristin Smith, the executive director of the Blockchain Association, said that this could significantly ramp up reporting for businesses and Americans.
“We interpret this to mean software wallet developers, hardware wallet manufacturers, multisig service providers, liquidity providers, DAO token holders and potentially even miners,” Smith said.
The proposed bill enraged Republican lawmakers, as they said the tax could punish the digital asset industry to empower Wall Street.
“This was either skillfully crafted or maliciously ignorant. Few policies could be so bad for America and good for big banks,” Rep. Warren Davidson (R-OH), a House Freedom Caucus and Congressional Blockchain Caucus member, told Breitbart News.
“Crypto has been around for over a decade without proper regulation, but it only took two days for the Senate to use crypto as a pay-for in this bad infrastructure deal,” the Ohio conservative added.
Sen. Cynthia Lummis (R-WY), a member of the Senate Banking Committee, told Breitbart News said that she will work to fix this proposal.
“This is a very complicated space, easy to get wrong, and this is why we need a real committee process to consider these issues, instead of secret drafting. We’re working on making it better,” Lummis said.
A spokesperson for Sen. Pat Toomey (R-PA), the ranking member of the Senate Budget Committee, confirmed to Breitbart News that the senator is also concerned about the cryptocurrency tax proposal.
Rep. Tedd Budd (R-NC) wrote Thursday that the proposal would hurt America’s competitiveness in the cryptocurrency industry.
“Taxing every day #crypto investors & innovators like this will undermine U.S. leadership in this industry. Totally self-destructive,” Budd said.
Smith said in a statement Thursday that the cryptocurrency tax proposal could potentially send American jobs overseas or even violate American liberties.
“While improvements to our nation’s infrastructure are important, the hastily drafted language around revenue raising provisions in the infrastructure package could have unintended consequences that strike at the heart of innovation in the cryptocurrency ecosystem, risk driving jobs overseas, and may jeopardize Americans’ Fourth Amendment protections,” Smith explained.
Perianne Boring, the president and founder of the digital currency trader association Chamber of Digital Commerce, told Breitbart News in an exclusive interview Thursday that the legislation could have dire consequences for the industry, including sending American jobs overseas. Further, she emphasized the cryptocurrency industry has been incredibly proactive with regard to reporting requirements with the federal government.
She explained, “The digital asset in the cryptocurrency ecosystem is one of the most exciting and promising industries in our economy, and it deserves a thoughtful policy process to ensure we get it right. And there are a lot of unintended consequences in the current draft in this infrastructure bill that could drive innovation overseas.”
Boring explained that Senate lawmakers drafting the legislation proposed the cryptocurrency to close the perceived “tax gap” between traditional financial markets and the digital currency market; however, she said that this could not be further from the truth.
Boring said that since the IRS issued its guidance that digital currencies are taxed property, they have failed to “answer very basic questions” and update their guidance.
For instance, the Chamber sent a letter to the IRS in May, stating that while the tax agency has stepped up its audit enforcement of digital currency investors, it has not “provided meaningful guidance on how to comply with tax rules since 2014.”
Amy Davine Kim, the chief policy officer at the Chamber, said, “This disparity creates risk for taxpayers seeking to comply with the laws, wastes IRS audit resources, dampens commercial activity and economic recovery, and stifles U.S. innovation.”
“Their perspective is that this is closing a tax gap, there really seems to be this idea that there is noncompliance throughout the [digital currency] industry. And I think that is an incredibly disingenuous posture to take,” she said.
Disclaimer: Sean Moran previously worked as a Legislative Research Assistant for the Chamber of Digital Commerce.
Sean Moran is a congressional reporter for Breitbart News. Follow him on Twitter @SeanMoran3.
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