Biden Backs Infrastructure Bill Draft Posing Threat to DeFi
The White House has backed a last-minute amendment to the Senate's infrastructure bill that could place stringent tax reporting rules on crypto developers and Proof-of-Stake validators.Â
Key Takeaways
- The Senate is debating a massive infrastructure bill bearing concerning crypto-related provisions.
- The White House has backed an amendment to the bill that threatens DeFi and Proof-of-Stake validators.
- The final vote on the amendment is due on Saturday.
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The White House has weighed in on the ongoing infrastructure bill debates.
White House Backs Controversial Bill Amendment
The Biden Administration has backed an amendment to the infrastructure bill draft that could pose strict tax reporting rules on DeFi developers and Proof-of-Stake validators.
Senators Rob Portman and Mark Warner submitted a draft Thursday in response to an earlier amendment to the bill’s cryptocurrency provision. The new draft excludes only Proof-of-Work miners from the provision defining brokers, leaving room for crypto developers and Proof-of-Stake validators to be labeled as such. If passed, it would mean that DeFi developers and Proof-of-Stake validators in the U.S. would have to adhere to strict tax reporting rules.
The White House formally backed the amendment in a statement Thursday. A note posted by White House deputy press secretary Andrew Bates read:
“The Administration believes this provision will strengthen tax compliance in this emerging area of finance and ensure that high income taxpayers are contributing what they owe under the law. We are grateful to Chairman Wyden for his leadership in pushing the Senate to address this issue, however we believe that the alternative amendment put forward by Senators Warner, Portman, and Sinema strikes the right balance and makes an important step forward in promoting tax compliance.”
The Senate is currently debating a $1 trillion bipartisan infrastructure bill to go towards various projects driving economic growth. It needs to raise $550 billion, with $28 billion to be secured through stringent cryptocurrency taxation.
The Senate included new provisions to expand the Tax Code’s definition of a “broker.” The original draft of the bill proposed the following definition:
“Any person who (for consideration) regularly provides any service or application (even if non-custodial) to facilitate transfers of digital assets, including any decentralized exchange or peer-to-peer marketplace.”
The proposal sparked debate across the cryptocurrency industry as the definition would apply to almost everyone using the technology, including miners, validators, developers, and non-custodial wallets. Coin Center and other advocacy groups then persuaded the Senate to amend the definition to focus on those providing a service on behalf of someone else.
Still, many crypto advocates argued that the new definition was too vague. The Blockchain Association posted a tweet stating that the wording posed “fundamental concerns” about the provision’s definitions.
In response to the debates surrounding the definition, Senators Ron Wyden, Pat Toomey, and Cynthia Lummis proposed a more crypto-friendly amendment Wednesday, suggesting a definition that would exclude miners, validators, protocol developers, and wallet creators.
The following day, Portman and Warner proposed their own rival amendment that only excludes Proof-of-work miners and wallet creators from the provision. Many crypto followers have pointed out that this provision could mean validators on Proof-of-Stake chains like Binance Smart Chain, Cardano, and Ethereum 2.0, and developers of DeFi protocols would be required to follow strict tax reporting requirements.
The statement from the White House has left many in the industry feeling blind-sided. Few expected the Biden Administration’s input on the issue, and it could increase the likelihood of Portman and Warner’s draft passing through Senate. As some have pointed out, it’s particularly surprising to see the White House supporting provisions that favor the more energy-intensive Proof-of-Work consensus mechanism over Proof-of-Stake given Biden’s pledges to tackle climate issues.
The final voting on the amendments is likely to happen Saturday, leaving the crypto industry with one day to lobby the Senate to approve the Wyden-Toomey-Lummis amendment.
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