U.S. Senate ends debate on crypto-tax amendments

On Sunday, 9 August, the U.S. Senate voted to end debate on amendments to the infrastructure bill, some provisions of which target additional taxation of the crypto industry.

Sunday night infrastructure bill update:

The Senate has voted 68-29 to end debate. We wanted a vote on the Wyden amendment first, or on a Wyden-Warner compromise, but no luck.

The Senate has to wait until Tuesday to do a final vote. They might still amend the bill before then. https://t.co/VFrmnZqOPQ

— Jake Chervinsky (@jchervinsky) August 9, 2021

The vote stood 68–29, industry lawyer Jake Chervinsky wrote. On Tuesday the Senate will hold its final vote and could still amend the bill, he noted.

The current version of the plan envisions additional $28 billion in funding for infrastructure through taxes on crypto-asset transactions. The bill also expands the definition of ‘broker’ to include non-custodial participants in the industry and adds reporting requirements for digital assets.

The proposed provisions drew sharp criticism from the community. Experts say that most industry participants will be unable to comply with them, and the consequences for the U.S. crypto industry could be devastating. Many prominent figures opposed the provisions, including Elon Musk and Jack Dorsey.

Senators Ron Wyden, Cynthia Lummis and Pat Toomey proposed to carve miners, node operators, software developers and other non-custodial participants from the broker definition. The amendment found support in the community.

One of the bill’s authors, Rob Portman, agreed with colleagues. However, with Senators Mark Warner and Kyrsten Sinema he presented a competing proposal. The amendment excludes from the plan miners on the Proof-of-Work (PoW) algorithm and sellers of equipment or software that allow individuals to control private keys, but not PoS validators. This proposal found support in the Biden administration.

On August 7, Warner and Sinema released an updated version of the amendment. It now excludes both PoW miners and PoS validators, but does not touch other consensus mechanisms.

Senator Warner has revised his amendment yet again. He now excludes proof-of-work and proof-of-stake, but not any other consensus mechanism. I am speechless. Now they’re picking 2 winners? There are other consensus mechanisms! Why do this? pic.twitter.com/NAqjmzvw8R

— Jerry Brito (@jerrybrito) August 7, 2021

«Today evening the crypto industry has landed in a bind», — commented Senator Ted Cruz on the Sunday vote.

🚨Crypto got screwed tonight.🚨

There’s a partisan disagreement on spending, so Dems objected to ALL further amendments.

That means NO vote on Wyden-Lummis to lessen the damage this bill will do to crypto, & NO vote on the Cruz amd. to repeal the new crypto rules altogether.

— Ted Cruz (@tedcruz) August 9, 2021

He noted that all Democrats voted against.

«The result? The Senate will inflict billions of dollars of damage on a burgeoning industry and drive much of it overseas. Five senators who understand cryptocurrency were not found,» added the senator.

Politico reporter Kelly Maedrich noted that Portman, in his floor remarks, explicitly named the categories that should be ‘clearly exempt’ from the bill’s tax provisions: miners, stakers, validators, node operators and developers.

Coin Center chief Jerry Brito says this explicit statement will help ensure the Treasury interprets the rules correctly.

I’m happy to see Sen. Portman was explicit in his floor statement today that miners, stakers, and similar validators, as well as node operators and devs, are not covered by his provision. This clear statement of intent will help ensure Treasury interprets is correctly. https://t.co/2oKwGLkU4d

— Jerry Brito (@jerrybrito) August 8, 2021

Despite the vote results, Cynthia Lummis noted that talks with colleagues were ‘productive’, but they hit a snag due to the 30-hour rule. This deadline limits the time for reading and revising bills ahead of a vote.

This has been an interesting day. Here’s what is happening: First, we’ve been able to have very productive conversations with senators on all sides of this issue, and if we could vote on amendments I think the digital asset community would be pleased with the outcome.

— Senator Cynthia Lummis (@SenLummis) August 9, 2021

She noted that every Democrat voted against moving to a vote on amendments.

«And so, we’re at an impasse. I understand my colleagues’ positions. But real people will be hurt if we do not change the language in this bill. Tomorrow we’ll be back in session and again work to convince our colleagues and Senator Schumer that our amendment deserves a vote.»

So we’re at an impasse. I understand my colleagues’ positions. But real people are going to be hurt if we do not change the language in this bill. Tomorrow we’ll be back in session and again work to convince our colleagues and Senator Schumer that our amendment deserves a vote.

— Senator Cynthia Lummis (@SenLummis) August 9, 2021

«Tomorrow in the Senate is life or death. The current language is crippling to the US’s dominance in crypto and goes the route of the CCP. For those of you new to politics — welcome aboard. Don’t quit if we lose, and don’t quit if we win,» said Tyler Lindholm, head of Lummis’ campaign staff.

Live or die in the Senate is tomorrow. The current language is crippling to the US’s dominance in crypto and goes the route of the CCP.

For those of you new to politics because of this. Welcome aboard!

Don’t quit if we lose, and don’t quit if we win!

— Tyler Lindholm (@Tyler_Lindholm) August 9, 2021

As reported, Treasury Secretary Janet Yellen lobbies for the crypto-unfriendly provisions of the bill.