Dueling Crypto Plans Pit White House Against Key Democrat

(Bloomberg) --

The cryptocurrency industry was braced for a big win in the infrastructure bill Thursday evening -- a bipartisan amendment that would scale back proposed surveillance over digital asset transactions -- but it’s now facing uncertainty after a last-minute competing plan popped up.

The conflict was one of several issues that cropped up Thursday night and stymied Senate Majority Leader Chuck Schumer’s attempt to get unanimous agreement among lawmakers to pass the $550 billion bipartisan infrastructure bill on an expedited timeline. The Senate adjourned just after midnight with a plan to resume Saturday to finish passing the legislation.

The two dueling factions aren’t composed of the usual Capitol Hill allies. Senate Finance Committee Chairman Ron Wyden, a progressive Democrat, teamed up with conservative Republicans Pat Toomey and Cynthia Lummis in working with the cryptocurrency industry to draft a change to the bill after criticism that initially proposed reporting requirements were too broad.

That amendment appeared set to pass, until Democrats Mark Warner and Kyrsten Sinema, along with Republican Rob Portman, offered up their own competing version. That one included stricter disclosures to the Internal Revenue Service. The White House endorsed their version, causing chaos and confusion about which proposal will ultimately move forward.

The fault lines risk causing a rift between President Joe Biden’s administration and Wyden, who will be the most important figure in making sure Biden’s tax agenda can clear the Senate later this year.

The Blockchain Association, a trade group for the industry, mounted a last-minute pressure campaign in favor of the Wyden-Toomey-Lummis version. Wyden said they were making the case to colleagues that their version makes it “very hard for tax cheats, without discouraging innovation.”

The infrastructure bill would require that crypto brokers report transaction data to the IRS so the federal government can collect taxes from those trades. Earlier this week, Wyden, Toomey and Lummis unveiled a change to the original text that would exclude entities including miners, software designers and protocol developers from the groups that need to report data to the IRS. The lawmakers said those groups don’t have access to the data the bill would require them to report.

The competing Portman-Warner-Sinema amendment wouldn’t grant quite so many exceptions. The White House, in a statement, praised this version for having stronger tax-compliance rules.

“We’re just trying to clarify the language in the bill, which we think actually is pretty clear,” said Portman, who helped draft the crypto provision in the original legislation.

White House Press Secretary Jen Psaki on Friday said that the administration is “grateful” for Wyden’s leadership on crypto issues, but reiterated that it prefers the alternative plan.

“I would just go back to the overarching objective here which is reducing tax evasion in the cryptocurrency market, and we feel that the compromise sponsored by Senators Warner, Portman, and Sinema is a good option,” she said.

The Portman-Warner-Sinema amendment is “the government picking a winner and losers in an otherwise competitive field,” Jerry Brito, executive director of Coin Center, said in a statement Friday. “Tech policy of this magnitude is being done as a last-minute tax provision buried in a massive must-pass infrastructure bill. This is no way to make policy.”

The crypto amendments, which are mutually exclusive, could both be considered again on Saturday, but it’s unclear if they will each get a vote. It’s also not certain what happens if they both pass. One possibility is that they would be added to the bill to be sent over to the House, with differences getting resolved in that chamber.

“We’re getting a variety of different opinions, including that both of them would go to the House,” Wyden said. “It’s not clear.”

The House does not have any immediate plans to begin considering the bill. Lawmakers are scheduled to be away from Washington until mid-September.

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