“Bewildering is an understatement for what is unfolding in the US Senate around the crypto-related provisions of the infrastructure bill,” says Sheila Warren, Head of Blockchain and Digital Assets at the World Economic Forum.
The US President Joe Biden has backed an ignorant amendment by Senators Rob Portman (R-Oh) and Mark Warner (D-Va) which excludes only Proof of Work (PoW) miners from the definition of a broker for tax reporting purposes as well as self-custodian hardware or software companies/developers.
It does not exclude Proof of Stake (PoS) validators and it does not exclude self-custodian smart contract unlike a competing amendment by Senators Ron Wyden (D-Or), Pat Toomey (R-Pa), and Cynthia Lummis (R-Wy).
“It was remarkable to see language endorsed that was not neutral about technology. This has massive implications for a relatively nascent industry.
It was even more remarkable that these provisions were attached to something like an infrastructure bill.
Regulation can add value when it is carefully considered, evaluated, and weighed. Legislative rulemaking is usually a slow process for a reason. The approach we have seen is highly unusual,” Sheila Warren of WEF says.
The two amendments are going to a vote potentially on Saturday concerning the very first, potentially in the world, law making act that concerns crypto.
The intention is ostensibly to deter tax avoidance by requiring brokers to report the identity of individuals engaging in transfers of $10,000 worth of crypto or more.
The initial definition of broker was far too wide, defining it as any intermediary, thus amendments were made to narrow the definition.
The Battle For The Unlicensing of Code
Biden’s choice to go with an amendment that makes a distinction between PoW and PoS validators is puzzling if it is not more a negotiation strategy as they presumably obviously don’t really want to make such distinction.
The real negotiation is instead between having that (C) part of the amendment or not having it, something that can determine whether such a thing as a decentralized finance dapp can even exist within the United States.
Penalties under the Internal Revenue Code can be harsh, including prison, with stakes very high here as there may be a very real chilling effect within the United States.
Things like MetaMask would be excluded under the Biden amendment, but not things like Compound or Curve or Uniswap or the whole Defi space with its circa $73 billion in assets.
Enforcement would begin on the 1st of January 2023, so there would be one year for relocation with Europe standing out to be a very big winner if Biden’s amendment passes.
Europe kind of missed the internet boom because America took a very hands off approach, facilitating the rise of US tech giants that now dominate the leaderboard of global stock markets.
Europe is not quite missing the crypto boom however with this potential blunder by the US Congress giving Europe a golden opportunity to dominate tomorrow’s finance.
If the Lummis, Toomey, Wyden amendment passes, then this bill would be neutral in as far as cryptos would be treated like cash.
The Biden backed Portman amendment instead in its current form is obviously idiotic and you’d think no elected body would vote for it if such elected body wanted its people to think that elections matter because if the amendment passes in its current form, many potential future leaders will conclude that there is effectively no Congress in the United States as you can’t make such distinction between PoW and PoS validators when there’s no difference between them.
If it passes in a further amended way to close that distinction, but without excluding self-custodian smart contracts, then Biden will never be forgiven for it and it may well be that Democrats as a whole will never be forgiven, with that party risking being Trumped or worse, decimated like the British Labor, because it would amount to effectively requiring a license for publishing code.
The amendment is anti-innovation, anti-progress, anti-American in spirit, and a chaining of the American people in practice, for the United States will not have methods through automated decentralized smart contracts where things like Libor style cheating becomes impossible.
If that amendment passes, everyone will assume that the United States is controlled by banks and therefore there is no freedom nor democracy in the United States, with the only hope then being the Supreme Court which can strike down this act as being unconstitutional due to effectively requiring a license for speech, and code is speech.
The government is prohibited by the first amendment from requiring licensing for the publishing of code, with a smart contract being the publishing of code on the open source ethereum global network.
If that amendment passes therefore Congress would risk only embarrassing itself by revealing something very sinister as the Supreme Court may well strike down that act squeezed in at the very last minute on a bill about trains.
It would just show that Congress has stopped functioning and has stopped serving the people. If that is what they want to communicate, then Americans have a very big problem on their hands but the rest of the world and as far as this space is concerned, nothing will quite change as Europe won’t follow unless it wants to be called a vassal by its own people which would still leave the Nakamoto way.
All the dapps that comply will then probably be forked off because you can’t be decentralized and comply with this law as amended by Portman, and not being decentralized means you can’t remove a lot of cheating in old finance with Libor being the prime example.
Europe thus would dominate the stock markets of tomorrow, with it not hard to call anti-American any Congressman that votes for the Portman amendment over Lummis as the Portman amendment is precisely what an enemy government of the United States would dream of drafting. Something that must have consequences come elections.
While the Lummis amendment is neutral and serves the precise stated purpose of this act, rather than sinister aims which in this space would probably be called the chaining of the United States by its own elected.
All of which suggests Lummis should win, but we’re to see whether America really has a Congress that truly represents it people and serves the voters.