Crypto Industry Mobilizes to Stop Controversial Tax Plan

Crypto Industry Mobilizes to Stop Controversial Tax Plan

In brief

  • The crypto community is not happy at all with the recent tax amendment that seemingly targets DeFi.
  • If it passes, a lot of crypto-related entities will have to either leave the U.S. or shut down, FTX CEO argued.
  • The crypto community is pushing back against the recent crypto tax amendment that could have disastrous effects on the burgeoning industry, according to a new petition published on FightForTheFuture.

    “This is a red alert. A provision that’s so poorly written it could crush the cryptocurrency ecosystem and dramatically expand U.S. government surveillance has been added to the must-pass bipartisan infrastructure package at the last minute,” the petition stated.

    Late breaking - White House is coming out formally in support of Warner-Portman-Sinema crypto amendment, implicitly against the Toomey-Wyden-Lummis plan— Jeff Stein (@JStein_WaPo) August 6, 2021

    The Biden Administration has recently backed a new tax amendment—one of the two proposed—that targeted decentralized finance (DeFi) and proof-of-stake (PoS) protocol.

    Presented by Senators Rob Portman and Mark Warner, the amendment would expand the breadth of taxation on crypto transactions and introduce new reporting requirements for entities classified as “brokers.”

    The lawmakers also provided an exemption from these obligations—but only to proof-of-work (PoW) networks. The two largest PoW networks are Bitcoin and Ethereum. The latter network will, however, shift to PoS in the near future following the launch of Ethereum 2.0.

    The current language includes entities such as open-source developers, validators, and stakers as brokers, making complicity nearly impossible. Node runners, for example, are not able to gather the necessary user information for every crypto transaction they validate.

    Crypto industry pushes back

    Members of the crypto community have been actively working with lobbyist groups and members of the Senate to adjust key features of the bill.

    Zak Cole, the CTO of decentralized trading platform Slingshot, even prepared a template that people can use to text local senators and oppose the amendments.

    Text RESIST to 50409 and use the below message as a template:Hi, I’m contacting you to ask that you support Senator Wyden, Toomey, and Lummis’s amendment to the cryptocurrency provision of the infrastructure bill (H.R. 3684) . This amendment will ensure that the provision does— Zak Cole (@0xzak) August 6, 2021

    “The explicit exemption of PoW creates an implication that PoS would trigger requirements. This isn't about PoS miners being lazy or hating tax. They propagate public, decentralized, general ledgers. They don't know what trades people do any more than the public does!” said Sam Bankman-Fried, CEO of crypto derivatives exchange FTX.

    If the new bill passes, such entities will have no other choice but to either shut down or leave the U.S. because “they couldn't choose to comply even if they wanted to” and “the impact would just be to force crypto infrastructure and innovation offshore,” Bankman-Fried argued.

    16) So what's next?I don't know, we'll see.But, hopefully, we can move forward with reasonable, sturdy regulations, while making sure that they make sense in the context of the function and power of the technology.— SBF (@SBF_FTX) August 6, 2021

    An alternative proposal from Senators Ron Wyden, Pat Toomey, and Cynthia Lummis, which offered a “clear, constructive approach towards crypto regulation,” said Bankman-Fried, has been sidelined.

    This approach would exempt crypto miners and developers from being considered “brokers.” Unfortunately for many in the crypto industry, this exemption has not been included.

    The final vote for the bill will reportedly take place on Saturday, August 7.

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