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Senators Seek Crypto Reporting Fix as Biden Signs Infrastructure Bill

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What You Need to Know

  • Some U.S. senators aim to narrow cryptocurrency tax reporting rules, which they see as overly broad and stifling to the growth of digital currencies.

A bipartisan team of U.S. senators is introducing a bill to narrow some cryptocurrency tax reporting rules that were laid out in the infrastructure legislation that’s set to become law on Monday.

[Editor's note: President Joe Biden signed the bill into law late Monday.]

The new bill, the text of which was obtained by Bloomberg News, seeks to override a provision in the infrastructure legislation that cryptocurrency investors say is overly broad and would stifle growth of digital currencies.

Senate Finance Committee Chairman Ron Wyden, an Oregon Democrat, and Senator Cynthia Lummis, a Wyoming Republican, wrote the tweak to the rules.

“Our bill makes clear that the new reporting requirements do not apply to individuals developing blockchain technology and wallets,” Wyden said in a statement. “This will protect American innovation while at the same time ensuring those who buy and sell cryptocurrency pay the taxes they already owe.”

The legislation would address new tax-reporting requirements for digital currencies included in the $550 billion infrastructure bill that President Joe Biden is scheduled to sign into law Monday.

The new law will force 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.

Innovation Question

The standalone bill comes after several attempts to address concerns voiced by the cryptocurrency industry during the infrastructure negotiations in the Senate.

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Advocates said they’re worried that the language in the public-works bill would require entities like miners and software developers to report tax data to the Internal Revenue Service that they can’t access.

“Digital assets are here to stay in our financial system and the decisions we make now will have impacts far into the future,” Lummis said in a statement. “We need to be fostering innovation, not stifling it.”

It’s not yet clear when the crypto reporting bill could come up for a vote, or if it could be included in other year-end legislative packages in coming weeks. The bill includes a provision that would make it retroactive to the infrastructure bill’s signing.

The cryptocurrency rules were included in the infrastructure bill as a way to offset some of the cost of the $550 billion in new spending. The Joint Committee on Taxation, Congress’s official tax scorekeeper, estimates they would raise about $28 billion over a decade.

The effort to amend the infrastructure bill and more recent attempts to alter the legislation retroactively were the result of cryptocurrency advocates and companies joining forces this summer after the tax requirements were inserted into the public-works package.

Square Inc. Chief Executive Officer Jack Dorsey and Coinbase Global Inc. CEO Brian Armstrong, have expressed support for amending the existing language in the infrastructure plan.

(Image: Shutterstock)

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