The Speaker of the House, Nancy Pelosi, on Tuesday committed to pass the President’s bipartisan infrastructure bill by the end of September.
Many in the cryptocurrency industry in the past few weeks have rallied to fight the legislation under the argument that the Internal Revenue Service will place excessive reporting requirements for participants in blockchain’s consensus-making process. But D.C. is in a giant political quagmire right now and the last thing on its mind is Bitcoin, Ethereum and their offspring.
“This whole package is at the whim of broader politics which is one of the reasons why attaching a provision like this to a 2,600-page infrastructure bill is just baseline misguided,” Miller Whitehouse-Levine, the policy director at the DeFi Education Fund told The Defiant.
That’s too bad for blockchain investors, because a new definition of what it means to be a cryptocurrency broker is set to pass within President Biden’s $1 billion infrastructure plan. The bill passed the Senate in early August.
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Blockchain advocates in D.C. organized a big push as the language was discovered on the Senate side, but they have been oddly quiet as the legislation has sat in the House for final passage. That’s not without reason.
The advocates The Defiant spoke to explained that the House Rules Committee had already decided that the legislation would not be considered with opportunities for amendment. Without that, there’s no way to change the crypto language.
Pushing to simply vote down the bill is not really an option either, because it otherwise has broad support.
“In those super high level political discussions unfortunately the crypto provision isn’t top of mind,” Whitehouse-Levine said.
The math got very big as this process proceeded.
House Democrats solidly on the left wanted to hold the Infrastructure Bill until the House received the budget resolution from the Senate, a three times larger spending package that dealt with more progressive priorities.
“The politics at this level are so broad it’s going to be difficult to hold up this giant $4.5 trillion worth of spending to fix this,” Smith said.
It’s $4.5 trillion because the full budget and the infrastructure bill became one conversation.
Here’s how that worked: The $1.2 trillion infrastructure bill, supported by moderate Democrats and Republicans, gave progressive Democrats leverage to move their priorities. By holding hostage a bill centrists wanted to pass, the left is in a better position to move their own over $3 trillion budget priorities.
The progressives are a fairly large caucus in the House, where the Democrats hold a very narrow majority; however, on Aug. 23, the moderates showed they had run out of patience and began demanding that Biden’s infrastructure plan move without waiting on the Senate’s budget resolution.
“It’s really the intra-party politics among Democratic house members,” Whitehouse-Levine said.
CNN has a detailed breakdown of the politics in play.
A deal lands
As The Defiant was reporting this out, news broke that Pelosi had negotiated a deal that the moderates would support, one that finalized the infrastructure bill by Sept. 27.
It’s hard to imagine this deal doesn’t include a plan to move Biden’s priority legislation as is. The next stop would be the President’s desk.
“If the bill gets to Biden’s desk with the provision written as it is, then there would need to be a legislative attempt to fix a statute on the books,” Whitehouse-Levine said. In other words, starting over.
The White House
Jobs are a much larger priority for this administration than cryptocurrency. In fact the only corner of the Biden administration that has shown much interest in distributed ledgers is Gary Gensler’s U.S. Security and Exchange Commission. Gensler has shown more interest in more regulatory power to curtail the industry than he has helping it blossom.
Specifically, Gensler has suggested he’s ready and authorized to take on DeFi.
But the securities regulatory process and the lawmaking about tax law might as well be taking place on Mars and Venus right now, for as much as the two issues are directly connected at the moment.
The main policy development for the industry that we know about for sure right now is tax policy will start reaching more parts of the industry. How far it will go remains an open question.
What is to be done?
So if the bill becomes law, when’s the next opportunity for the cryptocurrency industry to weigh in?
“What we are going to do is try to figure out what that next opportunity is to change it,” Smith promised. “The good news is we have a lot of champions in the House and Senate ready to work with us.”
There’s a few ways in which the broker language could be addressed.
First, there’s the upcoming budget reconciliation process. Once an overall budget resolution gets passed many pieces of legislation will be written under what’s known as the reconciliation process to detail how the overall budget will be spent. One of those pieces could potentially revise the broker language, but there’s some danger doing so would fall afoul of rules that limit extraneous provisions in reconciliation bills (known as the Byrd rule).
Second, a new piece of legislation could simply be put forward by a legislator. There’s already a bipartisan group of Senators that have language they have agreed upon that could put forward such a measure (the same language they attempted to offer as an amendment to Biden’s Infrastructure bill).
“For our specific issue, I think we have the support for the majority of the members of the Senate. I think we got caught up last time in the broader politics,” Smith said. “We have the support to do this fix.”
Dealing with the law
But if that doesn’t work, lastly, blockchain advocates can address the measure in rulemaking. Once the bill becomes law, it’s up to the Treasury Department to draft a detailed rule that clarifies its interpretation of the new language.
While an extremely broad interpretation of the broker language could reach actors in the industry that never deal with customers directly at all, it’s not a given that Treasury will adopt such a broad interpretation.
When new regulations are put forward, there’s typically an opportunity for public comment. That’s a process that “crypto advocates have done successfully in the past,” Whitehouse-Levine noted, such as last year when it beat back the Trump administration’s proposed rule around self-hosted wallets.
“This whole thing could be hanging out there for a couple of months,” Smith said.