Dollar note and Bitcoin pictured together
Mykola Tys | LightRocket | Getty Images
Members of the Senate introduced an amendment to the infrastructure bill Wednesday attempting to clear up confusion about cryptocurrency “brokers,” based on language in the existing version that could roil the crypto markets if passed.
The update, filed by Sens. Ron Wyden, D-Ore.; Pat Toomey, R-Pa.; and Cynthia Lummis, R-Wyo. would specifically ensure the term “broker” excludes validators, hardware and software makers and protocol developers.
If included in the final bill, the amendment would be a win for the crypto industry, whose advocates have said was at risk of losing innovators and investors interested in doing crypto business in the U.S. The original language could also force some companies to shut down if they can’t comply or move offshore, these advocates said.
The Senate initially included crypto in the infrastructure bill as a “pay-for” provision that would help it generate revenue for the bill through increased tax compliance on crypto companies. These parties would have to file reports to the IRS.
The backlash from the crypto industry was a response to the bill’s broad definition of “broker” to include entities that don’t actually broker digital assets or that don’t have customers whose information needs to be reported to the IRS.
“By clarifying the definition of broker, our amendment will ensure non-financial intermediaries like miners, network validators, and other service providers — many of whom don’t even have the personal-identifying information needed to file a 1099 with the IRS — are not subject to the reporting requirements specified in the bipartisan infrastructure package,” Toomey said in a statement shared with CNBC Wednesday.
Currently, cryptocurrency exchanges may provide investors with a Form 1099-K detailing the transactions they’ve performed. The IRS gets this information, too.
Toomey, who often voices support of the crypto industry, is the ranking member on the Senate Banking Committee. Wyden is the chair of the Senate Finance Committee. Lummis has emerged as one of the bitcoin’s biggest advocates.
“Our amendment makes clear that reporting does not apply to individuals developing blockchain technology and wallets. This will protect American innovation while at the same time ensuring those who buy and sell cryptocurrency pay the taxes they already owe,” Wyden said in a statement.
Clarifying the provision to address concerns about who would be deemed a broker would not affect the reporting requirements on crypto exchanges like Coinbase that operate on behalf of customers, according to the Blockchain Association, a crypto trade association that works to change public policy at the federal level.
The group said it supports the amendment introduced Wednesday, in a joint statement with the crypto policy-focused nonprofit Coin Center, Coinbase, Square and venture capital firm Ribbit Capital.
“The development of crypto, and financial innovation generally, has enormous potential for the American economy and the American people through increased job creation and GDP growth,” they said. “It should not be subject to potentially devastating legislation without public participation and public comment.”
— CNBC’s Tom Franck contributed reporting.