The 'Infrastructure Investment and Jobs Act' presently before the United States Senate contains provisions that are way outside of the definition of that which we would call traditional infrastructure. To help pay for this massive spending agenda, this legislation proposes to squeeze tax dollars in the billions from taxation of cryptocurrency transactions. At the heart of this issue lies the definition of 'what is a broker?' for the purpose of imposing the tax and more importantly who will have to report the underlying transactions (1099 info, names, asset, dollar amounts, etc.) to the Internal Revenue Service.
The initial bill as proposed is a nightmare as its definition of a broker is to broad and vague to allow a workable system to function. Specifically, the bill originally defines a broker as “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.” [H. R. 3684. (Accessed August 8, 2021)].
Under the original definition, the reporting requirements conceivably could be extended to include cryptocurrency miners as well as software makers of crypto wallets - both of which do not engage in any trading activity at all. But of equal and more troubling concern are the financial surveillance aspects attendant within the proposed bill. As originally written, the bill could require certain companies to report information about individuals who are not even customers of the company in question.
In short, the original bill imposes unworkable conditions on the cryptocurrency industry. As written, the bill, if enacted, could seriously impede the growth and development of the emerging cryptocurrency technology. The impediment so imposed would deprive the overall economy the promise of job creation and GDP growth potential within cryptocurrency development.
There is hope however. Two competing amendments to the original bill have been advanced in the Senate attempting to address the vagueness of the broker definition.
On Wednesday, August 4, 2021, Senators Ron Wyden, D-Ore., Pat Toomey, R-Pa. and Cynthia Lummis, R-Wyo. introduced an amendment to the bill attempting to clarify the definition of a broker for purposes of the legislation. This amendment most importantly specifically exempts miners and cryptocurrency software developers from the definition of broker and therefore from the reporting requirements of the bill as well as many other actors in the cryptocurrency industry. This amendment is seem as an attempt to restore and insure the ability of the cryptocurrency industry to innovate, grow and expand reconciled with the other restrictive provisions of the bill. This amendment is the preferred compromise of the cryptocurrency community.
But on Thursday, August 5, 2021, Senators Rob Portman, R-Ohio, Mark Warner, D-Va. and Kyrsten Sinema, D-Ariz., introduced a competing amendment addressing the definition of a broker for purposes of this legislation. This amendment likewise exempts certain actors in cryptocurrency from the bills requirements, but is much more limited in the number of actors exempted than the Wyden/Toomey/Lummis amendment.
CONCLUSION
The issue of defining a 'broker' has managed to divide the Senators' in their attempt to rush this bill through before their upcoming one month break. It is clear from a reading of the behind the scenes politics surrounding this bill that the bipartisan support of it is tenuous at best and the squabble over these two amendments could jeopardize passage of the whole legislation.
If the broad definition or Portman/Warner/Sinema amendment definition of broker is passed into law, the cryptocurrency industry will be injured and ultimately may be driven off-shore. The reporting requirements of the bill applied to a broadly defined broker creates an unworkable system as well as an unwarranted intrusion into the privacy of individual cryptocurrency actors. As restrictive a definition of broker as possible is necessary to permit the cryptocurrency industry to grow and develop contributing to the benefit of America's overall economy.
An interesting conclusion has been presented by the Washington Post as regards this issue. "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 begun to upend politics in Washington." [Stein, J. and Alemany, J. "Cryptocurrency brawl bogs down infrastructure bill, as Yellen and White House fight changes". (Accessed August 8, 2021)].