The infrastructure bill has passed, much to the crypto community's chagrin, yet the key battles lie ahead.
Even though crypto has long attained relevance as an independent political issue, at times it gets entangled with the broader dynamics of the political process. The notorious infrastructure bill — a major pillar of the Biden administration’s economic agenda — suddenly passed in the U.S. House last Friday despite congressional Democrats’ original agreement to vote on the party’s other legislative priorities first. Having passed 228 to 206, the bill is moving to President Biden’s desk. Along with authorization of massive spending on roads, bridges and broadband internet access, it carries a handful of consequential crypto-related provisions that remained unchanged since the crypto community had vocally protested its tacit addition to the bill.
Disheartening as it is, this setback is not irreversible: Crypto advocates haven’t yet exhausted the full range of tools available to challenge the contestable tax reporting and financial surveillance rules.
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Better roads, more surveillance
The definition of a “broker” as it relates to an entity facilitating crypto transactions in the context of tax reporting is perhaps the major issue that the crypto folk have taken with the infrastructure bill language. The concern here is that, as it is currently worded, the definition can encompass actors such as node operators or protocol developers, requiring them to report information about transaction counterparties that they don’t have access to, thus making compliance impossible. It remains up to the Treasury Department, however, to define the exact rules for applying the norm, which provides room for the crypto industry to try and negotiate reasonable terms.
Another problematic clause, which has attracted attention later on, is provision 6050I that establishes extensive surveillance requirements for those who receive $10,000 or more worth of crypto. Many observers have called the norm unconstitutional, with Coinbase CEO Brian Armstrong labeling it a “disaster.”
Crypto mayors’ race
Meanwhile, New York City is getting its first Bitcoiner mayor. The state of New York has been known as a tough jurisdiction for crypto businesses to operate in, yet things could be getting better once Eric Adams takes office on the first day of 2022. One of the first statements that the mayor-elect made was a pledge to make New York a crypto-friendly destination by fostering talent for crypto-related jobs, removing barriers to the industry’s growth, and even considering a city coin project akin to MiamiCoin. Even if Adams’ Bitcoin advocacy remained confined to the realm of publicity alone, having a top official in one of the major global financial centers pushing the crypto agenda is still a massive win for the industry.
Dude, where’s my spot Bitcoin ETF?
Representatives Tom Emmer and Darren Soto, the crypto industry’s stout hearts, have put the Securities and Exchange Commission’s boss, Gary Gensler, on the spot over the agency’s apparent reluctance to approve applications for exchange-traded funds based on spot Bitcoin rather than BTC futures. The central point of their letter to Gensler is that the regulator’s argument about derivatives-based products offering more robust investor protections than those tracking spot prices does not hold much water.