Senator Cynthia Lummis (R-WY) gained fame among the crypto set for her embrace of Bitcoin and disdain for the Federal Reserve's expansionary monetary policy. Her colleague, Sen. Ron Wyden (D-OR), has long championed privacy protections for ordinary Americans.
It's no surprise, then, that the two are co-sponsoring legislation that will shield certain cryptocurrency actors from tax reporting requirements that went into effect after President Joe Biden signed a $1.2 trillion infrastructure package into law today.
The Wyden/Lummis bill would revise the definition of digital asset brokers to exclude cryptocurrency miners, stakers, wallet providers, and blockchain software developers, so that they would not be responsible for filing customer data to the Internal Revenue Service.
Earlier this year, the crypto industry was thrown into a panic when a key part of Biden's infrastructure bill included a provision redefining the definition of broker for tax purposes to include those dealing with digital assets. While the ostensible purpose of the bill was to pay for several billion in spending by making sure people were paying their taxes on cryptocurrency earnings, trade groups and crypto lobbyists pointed out the legislation, if read broadly, could put a chill on the crypto ecosystem.
We need to be fostering innovation, not stifling it, if we are going to maintain America’s position as the global financial leader. https://t.co/px84GKbA4x
— Senator Cynthia Lummis (@SenLummis) November 15, 2021
For starters, the bill put a whole range of actors in the category of digital asset intermediaries, not just exchanges. While an exchange could reasonably be expected to report large transactions to the government in line with anti-money laundering and terror financing rules, cryptocurrency miners don't have personal data about the people whose transactions they are processing. Moreover, wallet providers and software developers, many argued, shouldn't be tasked with tracking the money that travels through their tools.
Today's language again revises the broker definition to include digital asset actors who don't actually handle funds.
“We need to be fostering innovation, not stifling it, if we are going to maintain America’s position as the global financial leader," said Sen. Lummis in a press release. "I’m proud to introduce this bipartisan bill to ensure that our tax system reflects the realities of digital assets and distributed ledger technology.”
Unlike many bills, which are floated without any real hope of passing, this one has the potential to become law. Sen. Wyden chairs the Senate Finance Committee, providing the bill with a track to the full floor. Moreover, the senators previously worked together to amend the existing infrastructure bill along similar lines, only to be stymied late in the game when a single senator, Richard Shelby (R-AL), voted against the amendment.
Senator Wyden has frequently sponsored or supported bills that would block the government from mandating backdoors for encryption protocols, weaken privacy protections in the Fourth Amendment, or allow for increased electronic surveillance of American citizens.
Senator Lummis, though more conservative on financial matters than Wyden, is more or less aligned with him on matters of Bitcoin as it relates to personal privacy. The freshman senator bought her first Bitcoin in 2013, stating later, "I believe in the economic power of scarcity and the potential for bitcoin to address some of the manipulations in our financial system."