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The U.S. Capitol in Washington, D.C.
Al Drago/Bloomberg
A battle over taxing cryptocurrency is threatening to derail a vote on the $1 trillion infrastructure bill in the Senate.
At issue is the definition of who qualifies as a brokerage or exchange for new reporting and taxation. The infrastructure bill aims to raise $28 billion with new reporting requirements on crypto, which would be imposed on exchanges like
Coinbase Global
(ticker: COIN) and others that broker transactions.
The crypto industry has lobbied hard, arguing the bill could subject crypto miners, software developers, and companies that develop digital wallets to reporting requirements. That prompted three senators to introduce an amendment that would scale back the definition of broker to exclude networks “validating distributed ledger transactions,” along with software and hardware developers and companies “developing digital assets.”
The White House, though, has objected to that and is now backing a competing amendment from Sen. Rob Portman (R-Ohio) and Mark Warner (D-Va.). The Portman-Warner measure would exclude “proof of work” blockchain networks, like the one running Bitcoin, from tax-reporting requirements, but it would leave the door open for “proof of stake” networks, like the one that Ethereum is turning into.
Sen. Patrick Toomey (R-Pa.) and other backers of the original amendment have said they won’t support the latest one.
“I think we’re at an impasse,” Toomey told reporters, according to Roll Call. “They want to apply this in a fashion that we think is too broad, doesn’t work and shouldn’t be done–and will do harm.”
Some crypto backers argue that the Portman-Warner amendment would be excessively tough on mining networks and others in the industry. They say it would carve out an exception for Bitcoin and other “proof of work” blockchain mining, while leaving those based on other protocols with new reporting obligations, along with some software and hardware developers.
Jerry Brito, executive director of Coin Center, a crypto advocacy group, tweeted that the Portman amendment is “disastrous. It only excludes proof-of-work mining. And it does nothing for software [developers.] Ridiculous!”
The Senate may soon vote on both amendments as it gears up for a vote on the broader infrastructure bill this weekend.
The crypto markets don’t appear concerned. Bitcoin was trading up 6.7% to $41,800 on Friday, while Ethereum was ahead about 1% to $2,800.
Crypto mining stocks were ahead too.
Riot Blockchain
(RIOT) was up 2% to $34.27 and
Marathon Digital Holdings
(MARA) gained 4.2% to $32.89. One of the largest Bitcoin funds,
Grayscale Bitcoin Trust
(GBTC), was ahead 3.3% to $34.82.
Write to Daren Fonda at daren.fonda@barrons.com