Grassroots Effort
The provision caught lobbyists by surprise and spurred a heated grassroots effort. Fight for the Future, a nonprofit digital advocacy group, created a website that it said helped coordinate tens of thousands of calls to lawmakers. Senior crypto executives, such as Square Inc. Chief Executive Officer Jack Dorsey and Coinbase Global Inc. CEO Brian Armstrong, tweeted in support of changing the provision. When it became apparent that the only road to victory was a unanimous consent vote, crypto lobbyists tried to coordinate to gather intelligence from all 100 Senate offices to ensure that no lawmaker would object.
“We’ve known for a long time that we are under-resourced and understaffed,” said Blockchain Association executive director Kristin Smith, who said her advocacy group last year had a budget that was about 1% of that of the American Bankers Association. “What the crypto industry has woken up to is that they need to invest in Washington.”
The Senate is expected to pass the infrastructure bill on Tuesday morning. Crypto advocates will have a chance to change the provision in the House of Representatives when it takes the bill up in September but could face an uphill climb due to procedural issues.
Then the lobbying battle will move to the IRS as it writes rules to implement the law, a process that could take years. Some lawmakers have said that they don’t interpret the crypto provision to encompass as many companies as the industry fears.
The loss wasn’t a total failure for the crypto industry. Were it not for arcane rules of Senate procedure and a limited time span in which to fight, industry executives very well might have succeeded. They also found unexpected allies, such as Senate Finance Committee Chairman Ron Wyden, a progressive who has authored a wide array of tax proposals to increase levies on corporations and wealthy Americans.
The Oregon Democrat, whose committee has jurisdiction over tax issues, argued that crypto entities and investors needed fewer reporting rules than were included in the original bill -- not more -- an argument that’s in stark contrast to many of his other proposals that would give the IRS access to more taxpayer data.
Wyden has repeatedly said that his less strict approach would still prevent people from using crypto to evade taxes and launder money. But Wyden ultimately said he couldn’t agree to a bipartisan compromise amendment that five other senators supported. He said in a tweet that the deal “is certainly better than the underlying bill,” but that he doesn’t believe that the language goes far enough to “protect privacy and security.”
Potential Ally
Wyden could prove to be a valuable ally for the crypto community as Washington increasingly looks to regulate and tax the emerging technology.
The silver lining is that “we found out who in the Senate is interested in this subject who maybe previously didn’t know anything about it,” Senator Lummis, who co-founded the Financial Innovation Caucus, told reporters Monday.
Some crypto lobbyists said they must amp up their efforts to avoid similar pitfalls in the future.