Cryptocurrency lobbyists were caught ill-equipped in one of the first legislative battles for their nascent industry, despite a Herculean push that impressed Washington insiders with its intensity.
The industry failed to win a change to crypto tax reporting rules in the infrastructure bill on Monday, leaving intact language for broad oversight of virtual currencies in the legislation that’s poised to pass the Senate.
The amendment, with sponsors including Wyoming Republican Cynthia Lummis and Virginia Democrat Mark Warner, would have walked back new tax reporting requirements for crypto firms. It was designed to address concerns from the cryptocurrency industry that the bill would require entities -- like miners and software developers -- to report tax data to the Internal Revenue Service that they didn’t have access to.
The requirements, projected to raise about $28 billion in revenue, had been included as part of the Senate’s $550 billion infrastructure package.
In the end, the crypto industry’s lobbying, public outreach and even tweeted prayers weren’t enough. The last-minute amendment required unanimous consent -- which means support from all 100 senators -- and when Alabama Republican Richard Shelby objected, the fight was lost, at least for now.
While industries like banking, housing and pharmaceuticals have longstanding ties to lawmakers and lobbying operations sometimes backed by eight-figure bankrolls, the cryptocurrency industry is just making itself known in the halls of Congress for the most part. Bitcoin, for example, has fervent enthusiasts, but it has existed only since 2009 and many voters still don’t know much about it. Unlike other industries -- where there’s a bank, real-estate agent and pharmacy in every district -- lawmakers can’t always point to a constituent who supports cryptocurrency.
“What the industry was able to do once it was up against the ropes was impressive, but from a tactical perspective the goal is to avoid getting pinned against the ropes altogether,” said Isaac Boltansky, a policy analyst with investment firm Compass Point Research & Trading.
Crypto advocates say the Senate defeat shows the need for more organization and money as the burgeoning industry increasingly catches policy makers’ attention.
At issue was a so-called pay-for included in the Senate’s infrastructure package that Congress’s official tax scorekeeper said would raise the $28 billion over the next decade. The provision would require some cryptocurrency companies that provide a service “effectuating” the transfer of digital assets to report information on their users, as some other financial firms are required to do, in an effort to enforce tax compliance.
Crypto supporters said the provision’s wording would seemingly apply to companies that have no ability to collect data on users, such as cryptocurrency miners, and could push a swath of the industry overseas.