Battle for US Crypto Amendment Is Heating Up

A few days ago, the US Senate introduced a US$1.2 trillion bipartisan bill designed to update and regulate the country’s infrastructure. Unexpectedly, within the bill, there were provisions relating to the crypto industry.

These provisions relating to crypto sought to alter the definition of “broker” to include anyone who is “responsible for and regularly providing any service effectuating transfers of digital assets”.

This means that smart contracts, software developers or node validators are considered “brokers” as well – something that makes no sense to the crypto community.

Crypto Amendment Battle Over Legal Language

The bill sparked a battle among Democratic senators trying to narrow down the language in which the bill was written, and subsequently getting White House approval.

Crypto advocates Senators Cynthia Lummis, Pat Toomey and Ron Wyden proposed an amendment that redefines intermediaries and would exclude node validators, miners, wallet providers and open-source developers from the umbrella term “broker” and prevent them from reporting transaction data to the Internal Revenue Service (IRS).

The Wyden-Lummis-Toomey amendment is simple. It clarifies in law what most of us already believe—that validators of distributed ledger data like miners & stakers, hardware wallet providers & software developers should NOT be required to report transaction data to the IRS. pic.twitter.com/cMtoHMehiU

— Senator Cynthia Lummis (@SenLummis) August 5, 2021

However, the White House appears to back Senator Mark Warner’s amendment, which imposes tighter crypto rules and decides which technologies are legal and which are not in the crypto space. Warner proposed that Proof of Stake validators comply with US tax laws, excluding Proof of Work miners without explanation.

This means US regulators will decide which cryptocurrencies and technologies are valid and which are not, something many in the industry such as Coinbase CEO Brian Armstrong, Elon Musk, the Winklevoss twins, politicians including Ted Cruz, and even celebrities like Gene Simmons have criticised on Twitter.

Agreed, this is not the time to pick technology winners or losers in cryptocurrency technology. There is no crisis that compels hasty legislation.

— Elon Musk (@elonmusk) August 6, 2021

A Poorly Crafted Bill, Says the Crypto and Fintech Community

The crypto and fintech community has classified this bill as a “poorly written proposal” that would force crypto exchanges to establish surveillance mechanisms on their platforms as they would be required to collect user data, including names and addresses.

Armstrong was one of the first to denounce the bill’s flaws, such as defining those who deal with digital assets as brokers, or establishing Orwellian reporting requirements to surveil customers’ transactions.

4/ This makes no sense. Smart contracts, for instance, are not companies, and cannot be modified to collect KYC info or issue 1099s. They are simply software running on the blockchain that anyone can use.

— Brian Armstrong (@brian_armstrong) August 4, 2021

A Disaster for the Crypto Industry

Right now there’s a fight brewing in the US that could decide the future of innovation and financial freedom in the country. Industry leaders have warned that if the Warner amendment is approved, it will have a profoundly negative impact on the crypto industry, including pushing innovation offshore.

12/ The Wyden-Lummis-Toomey Amendment is win-win for lawmakers and our industry. It will provide tax revenue from crypto and ensure suitability and clarity for crypto innovators who want to build in America.

— Cameron Winklevoss (@cameron) August 6, 2021