A compromise on tax-reporting requirements for companies in the cryptocurrency industry pushed Bitcoin prices higher on Monday.
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Bitcoin and cryptocurrency stocks were rallying ahead of a compromise on tax-reporting requirements for digital assets in the Senate.
Bitcoin was up 5% to around $46,000, while Ethereum was ahead 4% to $3,150 Monday afternoon. The two largest cryptos have surged more than 20% over the past few days, pulling up other digital coins such as Cardano, Dogecoin, and XRP.
Crypto traders are buying coins and digital-asset stocks ahead of a vote in the Senate that will clarify reporting requirements on brokers and exchanges. Congress aims to raise $28 billion in revenue from crypto transactions to help pay for $550 billion in new infrastructure spending.
A compromise amendment on reporting requirements now appears to have been reached, according to a draft of the amendment obtained by Barron’s. Senators Cynthia Lummis (R., Wyo.) and Pat Toomey (R., Pa.) announced the deal with Democratic colleagues, forging a bipartisan coalition of key Senate negotiators.
Setting up a vote on amendments requires unanimous support in the Senate, though a 30-hour clock is now running for the bill to pass.
“We’re not proposing anything sweeping or anything radical––[the compromise] makes clear that a broker means only those persons that conduct transactions where consumers buy, sell and trade digital assets,” Toomey said in a press conference, according to CoinDesk.
The language clarifies a broker as “any person who…regularly effectuates transfers of digital assets on behalf of another person” and specifically excludes miners, including those involved in “validating distributed ledger transactions,” as well as hardware or software developers that provide private keys for people to access their digital assets.
The compromise comes as a relief to the industry. Crypto advocates lobbied hard against the bill’s original language that didn’t carve out exemptions for miners or software developers. That could have swept up miners and other crypto technology companies in new reporting requirements to the Internal Revenue Service, prompting an exodus of the industry to offshore locations.
Crypto backers, including Tesla CEO Elon Musk, have urged Congress not to play favorites with reporting for some types of mining or software. “This is not the time to pick technology winners or losers in cryptocurrency technology,” Musk recently said on Twitter. “There is no crisis that compels hasty legislation.”
Competing amendments would have excluded “proof of work” and “proof of stake” mining from the definition of a broker, but left the door open for reporting based on protocols, potentially requiring other miners to issue 1099 forms to crypto traders. That would have been unworkable for the industry, since miners don’t know their customers, by definition, and don’t broker transactions between two parties.
Mining companies, facing potential filing violations, could have fled to offshore locales, according to industry advocates. And the industry was adamant that new rules not be applied to specific technologies.
“Many types of blockchains exist today and we expect many new ones to be invented,” said Perianne Boring, founder and president of the Chamber of Digital Commerce, a crypto-lobbying organization. Any legislation that regulates miners should be “technology-neutral,” she added.
The Blockchain Association on Monday said that, while “long-term clarifying fixes” were needed, it encourages the Senate to support the compromise.
Mining companies and others in the crypto industry were rallying on the news. Marathon Digital Holdings (ticker: MARA), a company that processes blockchain transactions, was ahead 5.9%, while another miner, Riot Blockchain (RIOT), was soaring 12%. The Grayscale Bitcoin Trust (GBTC) was up 7%, and Coinbase Global (COIN) was ahead 7.2%.
Even though the legislation—crafted by a bipartisan group of senators and the White House—is all but guaranteed to pass the Senate and head to the House, opponents could still use the chamber’s rules to run the clock before the Senate can take a final vote. That would delay passage of the broader bill, absent an agreement, until Tuesday.
Write to Daren Fonda at daren.fonda@barrons.com
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