Mayhem appears to have broken loose in the world of American politics, and the crypto community may be caught in the eye of the storm, as now, proof-of-stake (PoS) networks might be left in danger at a time when Ethereum (ETH) is moving towards PoS. Moreover, the Lightning Network, decentralized exchanges, and DeFi might get hurt too. Updated at 16:39 UTC. See the whole text for updates. (
A controversial infrastructure bill being moved with alacrity through the parliamentary system contains a number of clauses that pertain to crypto players and how they are taxed. As previously reported, most of these pertain to the legal definition of a “broker.” This week, the American crypto community has attempted to drive up support for a bipartisan amendment to the bill put forward by three senators, including the crypto-keen Cynthia Lummis.
The original bill could force the crypto mining and trading community to cough up a staggering USD 28 billion – to help fund hundreds of billions worth of USD worth of public spending projects. The “Broker” status would require miners and developers, before they can pay taxes on historical earnings and their holdings, to give detailed lists of documents and transaction records to Internal Revenue Service officials.
Lummis and Ron Wyden, the Chairman of the Senate Finance Committee, and Pat Toomey, the Republican Senators, proposed an amendment to exempt miners validators and wallet-making developer from being classified as “brokers”. This would make them subject to all provisions of the bill.
Meanwhile, Treasury Secretary Janet L. Yellen spoke with lawmakers Thursday to raise objections to the effort led by Wyden and other senators to weaken the legislation’s proposed crypto overhauls, The Washington Post reported, citing two undisclosed people. According to the report, Yellen lobbied Wyden on the subject.
Now, there’s a new twist in the works: a rival amendment has appeared to be supported by the President.
Senators Rob Portman and Mark Warner launched the amendment. Kyrsten Sinema was not present. Confusingly, perhaps, this new amendment proposed the same for of exemption as the original amendment – but only for proof-of-work (PoW) miners, such as Bitcoin (BTC), and (for now), ETH miners. That means developers and validators on proof-of-stake networks like and Cardano (ADA) (or yet-to-be-launched Ethereum 2.0) would be classed as brokers – while Bitcoin protocol professionals would effectively escape unscathed.
Some people were quick to point out the differences, if any, between certain parts of this latest amendment proposal and others.
Jake Chervinsky (General Counsel at Compound Labs) stressed that “Portman-Warner protects PoW miner & some (but certainly not all) wallet project.” That’s all.
He stated that “Not software developers or Lightning node operators or PoS validators, DEX liquidity providers, DeFi aggregators or any other non-custodial actor who cannot comply with the law”
It appears that the new amendment could have some strong backers. The White House producer Pat Ward tweeted a statement from Andrew Bates, the White House Deputy Press Secretary, which read:
“The Administration is happy with the progress that has produced a compromise sponsored Senators Warner, Portman, and Sinema to advance and clarify the measure to lower tax evasion on the cryptocurrency market. This provision, according to the Administration, will improve tax compliance in this new area of finance and ensure high-income taxpayers pay what they owe under law.
The Washington Post economics reporter Jeff Stein confirmed that the White House “is coming out formally in support of the Warner-Portman-Sinema crypto amendment,” and “implicitly against the Toomey-Wyden-Lummis plan.”
The original amendment seems to be doing well, and there is a crucial debate in the Senate tomorrow.
Bates continued:
“We are grateful for Chairman Wyden’s leadership in pushing Senate to address this matter, but we believe that Senators Warner, Portman and Sinema strike the right balance and make an important step forward in tax compliance promotion.”
Chervinsky says that the “word in DC” is that the whole thing was Treasury’s idea.
“They don’t like what we’re building and their solution is to get jurisdiction over non-custodial agents. This was attempted via FinCEN’s proposed rule last year, but failed. They’re now trying again. They might succeed this time,” said he.
Lummis issued a desperate plea, writing:
We NEED you. Please contact your senators. Tweet. Email. The Wyden-Lummis–Toomey amendment is facing significant headwinds. It is a terrible policy to bury financial innovation in red paper and send [developers]/miners on info collection wild goose chases looking for information they don’t already know.
Wyden, meanwhile, took aim at the rival amendment, noting:
“The Warner-Portman-Sinema amendment provides a government-sanctioned safe harbor for the most climate-damaging form of crypto tech, called proof-of-work. This amendment would be dangerous for innovation and the climate.
Jerry Brito of Coin Center, a key advocate for the Wyden-Lummis-Toomey amendment, called the Warner-Portman-Sinema measure “disastrous” as “it only excludes proof-of-work mining” and “does nothing for software [developers].” If the rival amendment passes, he added “this is the US Congress picking winners and losers.” His sentiments were echoed by Senator Toomey.
The legal expert Sarah Shtylman, Counsel at Perkins Coie, opined that the Warner-Portman-Sinema amendment “demonstrates either blatant favoritism or a deep misunderstanding of the tech at issue.”
“The infrastructure bill in its entirety will most likely pass. The House will then vote on it. We can also push for an amendment depending on the outcome of the crypto provision. Chervinsky stated that the crypto provision will not take effect before 2023 at the latest. We can continue fighting to overturn it in Congress and in the courts.”
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