Senate adopts Biden plan including controversial cryptocurrency amendment

A Brief History of the Cryptocurrency Amendment in the United States

Last week, Cryptoast reported on hot tax news across the Atlantic. A crumb of the gigantic Biden plan of 1,200 billion dollars (USD) has indeed made jump many players in the cryptocurrency sector located in the United States.

Small history: the definition of broker has been extended to all those handling digital assets. However, any broker must be accountable to the American tax administration, in particular via reporting obligations on its clients.

Due to the vague term digital assets, some senators have proposed amendments to clarify who should be considered a broker.

One of these amendments, supported by the Biden administration, excluded miners and developers from this definition, but not players in decentralized finance (DeFi), nor those using proof-of-stake (PoS). The latter would therefore be subject to reporting obligations, while it is sometimes impossible to know precisely the identity of the customers.

A compromise found but buried by the will of a single senator

Players in the cryptocurrency sector then stepped up, starting with Sam Bankman-Fried, founder of the FTX exchange platform. In view of the emotion aroused by this amendment, pro-crypto senators including Cynthia Lummis reached a compromise. A unanimous vote of the senators would have allowed the adoption of the amendment most favorable to the sector, namely the exclusion from the definition of broker of almost all players, with the exception of traditional exchange platforms.

While the deal seemed to be on the right track, a certain senator, Richard Shelby, 87, decided to shatter the compromise found. He was therefore the only senator to vote against and the agreement was therefore rejected.

A few hours later, the Biden plan was adopted by the Senate, including the new definition of broker. Ironically, last week’s contentious amendment excluding minors from tax obligations but not DeFi players is no longer even present. The aim of the compromise was to replace the two competing amendments.

The compromise rejected, the tax obligations are therefore extended to the entire sector, from platforms to minors.

πŸ‘‰ Find all the news on cryptocurrency regulation

Consequences of the adoption of the amendment on cryptocurrencies in the United States

Concerns from the past week have intensified and reactions have not been long in coming. Thus, Charles Hoskinson, founder of Cardano (ADA) and co-founder of Ethereum (ETH), calls for a demonstration in the direction of Washington.

I think it’s about time we get a rally going in Washington DC. I’m going to make some phone calls. More on this later

– Charles Hoskinson (@IOHK_Charles) August 9, 2021

Mike Novogratz, CEO of Galaxy Investment Partners, an investment fund specializing in digital assets, jokes that people aged 80 and over are passing the most important laws in the country.

It’s time we propose a bill to get all people over 80 out of Congress. We force people out of the military at 62. Serving beyond ones time is a sheer act of narcissism. The world is changing too fast to have a collection of 70-80 year olds making all the important decisions.

– Mike Novogratz (@novogratz) August 9, 2021

Sam Bankman-Fried is more optimistic, he who estimated last week that this amendment could force some actors to leave the United States. He prefers to retain the bipartisan compromise found and hopes that an agreement will be reached in the future.

2) In this particular case, no amendments made it in because of procedural issues.

* But *, in the end, there was agreement on a reasonable amendment, between Democrats, Republicans, the whitehouse, and treasury.

So, when it comes time to later flesh it out, I’m optimistic.

– SBF (@SBF_FTX) August 9, 2021

Now, the Biden plan is in the hands of the House of Representatives, whose final vote is scheduled for the fall. Until then, there are many things that can work for or against the digital asset industry.

Increased surveillance of the crypto industry

What is certain is that the strengthening of tax obligations with the Internal Revenue Service (IRS), the US tax authorities, is a clear desire to more drastically monitor transactions in cryptoassets.

By forcing entities to check the identity of their clients, an essential step in reporting the requested items to the IRS, when they are unable to do so, is de facto to reduce their activities on American soil.

Some have also expressed concern that this measure could sink the American ecosystem, in particular by leaving the field open to Asia and more particularly to China, although the latter is increasingly wary of cryptocurrencies. A battle between regulators and players in the sector which is reminiscent of what has been happening in France for several years. The future of this amendment should therefore be followed with great attention.

πŸ‘‰ On the same subject: FATF Guidance: a potential strengthening of constraints for DeFi players

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About the author: Benjamin Allouch

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Lawyer specializing in digital law and personal data. He quickly became interested in bitcoin and blockchain technology, and founded the blog bitcoin-blockchain.fr. He is interested in the emergence of blockchain law and the legal consequences of this technology.
All articles by Benjamin Allouch.

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