A bipartisan group of lawmakers unveiled Monday a last-ditch effort to change cryptocurrency tax reporting provisions in an infrastructure package before the Senate, though the effort appeared likely to come up short.
They announced a compromise proposal intended to end a dayslong standoff over who counts as a “broker” under the legislation and is therefore subject to its new reporting requirements, which are meant to make sure the industry is complying with tax laws.
But even as they appeared to break one impasse, they quickly found themselves stuck in a broader fight among lawmakers over which, if any, amendments might still be made to the package, which is set to be approved as soon as Tuesday.
Sen. Pat Toomey (R-Pa.), one of the authors of the revised cryptocurrency plan, attempted Monday afternoon to attach the provisions to the spending package.
But his colleague Sen. Richard Shelby (R-Ala.) threatened to block that, unless Toomey also agreed to include Shelby’s amendment boosting defense spending.
Toomey readily agreed to that, but then their combined plan was blocked by Sen. Bernie Sanders (I-Vt.), who objected to the defense budget hike.
The upshot is the Senate is likely to approve infrastructure legislation with the original cryptocurrency provisions intact, despite the compromise winning support from across the political spectrum.
The Treasury Department backs the revisions, as do moderates such as Sen. Mark Warner (D-Va.) and hard-line conservatives, including Sen. Ted Cruz (R-Texas), who complained “there aren’t five senators in this body with any real understanding of how cryptocurrency operates.”
The Senate’s approval will send the matter to the House, where the plan’s advocates will get another chance to make the changes.
The reporting requirements are aimed at improving tax compliance by requiring brokers to report to the government how much people pay for the assets as well as their gross proceeds when they sell.
The legislation’s definition of “broker,” though, caused a fracas, with critics, led by the cryptocurrency industry, complaining it was overly broad and would sweep in too many unintended targets.
Treasury had balked at making any changes, arguing the industry was merely trying to water down the new rules.
But the two sides eventually agreed to define broker more narrowly, as someone who "regularly effectuates transfers of digital assets on behalf of another person" and to include special exceptions for “validators” and software-makers.
“Our solution makes clear that a broker means only those persons who conduct transactions on exchanges where consumers buy, sell and trade digital assets,” Toomey told reporters.
“It ensures that the bill does not sweep in software developers, crypto transaction validators, node operators or other non-brokers.”
Among the others backing the plan: Sens. Rob Portman (R-Ohio), Kyrsten Sinema (D-Ariz.) and Cynthia Lummis (R-Wyo.).
Treasury Secretary Janet Yellen said the compromise plan would "provide clarity on important provisions" that will "make meaningful progress on tax evasion in the cryptocurrency market."
Earlier in the day, some in the cryptocurrency industry had said they could live with the revised proposal.
"It's not perfect, but better than nothing," said Kristin Smith, head of the the Blockchain Association, writing on Twitter.
Not everyone was on board with the compromise.
Senate Finance Chair Ron Wyden (D-Ore.), who had been pushing for more changes, said the revisions didn’t go far enough.
“I don’t believe the cryptocurrency amendment language on offer is good enough to protect privacy and security, but it’s certainly better than the underlying bill,” said Wyden, also writing on Twitter.
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