Biden Administration Backs Plan to Increase Disclosure Requirements for Cryptocurrency

Critics say amendment would kill the multi-trillion-dollar digital currency industry

Santi Ruiz • August 6, 2021 5:30 pm

The Biden administration is throwing its support behind a legislative push to make cryptocurrency brokers disclose user transactions to the federal government, the latest volley in a battle over digital currency regulation.

The White House on Thursday signaled its support for an amendment to the Senate infrastructure bill that would increase government control over the currently unregulated space. Cryptocurrency advocates say the amendment from Sens. Rob Portman (R., Ohio) and Mark Warner (D., Va.) would kill the rapidly growing industry in the United States.

The amendment is the latest move from the Biden administration to rein in the cryptocurrency industry. SEC chair Gary Gensler on Tuesday described his plans to regulate an industry he described as “the Wild West.” Treasury Secretary Janet Yellen has criticized crypto “mining” processes, arguing they take up dangerous amounts of energy. Former Obama economist Jason Furman called into question the entire cryptocurrency space on Friday, saying, “If the technology makes it impossible to know people’s capital gains, then the technology should not exist.”

Cryptocurrency advocates say the amendment would unduly burden the industry. In particular, they criticize the amendment for its overly broad definition of what constitutes a “broker.” Because cryptocurrencies are decentralized, many or most participants in the space could be classified as brokers under the text’s definition. And because most actors in the space are anonymous, the amendment would require participants in the industry to disclose information they have no way of accessing.

Industry leaders say the amendment would force “miners” who devote computer power to creating new cryptocurrency out of the country. In June, China cracked down on mining, leading to an influx of mining activity in the United States. “Banning mining in the US would be an act of legislative stupidity on a par with prohibition,” said Nic Carter, a partner at Castle Island Ventures, a crypto-focused venture fund.

Other observers note that the amendment could make it harder for upstart companies to compete with big tech platforms in the cryptocurrency space. Cato Institute scholar Will Duffield said decentralized networks would face administrative burdens if they were required to report every transaction.

The battle over crypto amendments has delayed the massive infrastructure bill, which is expected to pass. A bipartisan group of senators has put forward a separate amendment that would restrict who has to disclose cryptocurrency transactions to the government.