Last-ditch effort to salvage cryptocurrency tax deal underway in Senate

A bipartisan group of lawmakers said Monday they’ve reached a compromise on cryptocurrency tax reporting provisions in an infrastructure bill in the Senate, though it remained unclear whether they’ll get a chance to put it to a vote.

Their revised amendment, written in consultation with the Treasury Department, attempts to end a dayslong standoff over who counts as a “broker” and is therefore subject to the new requirements, which are meant to make sure the industry is complying with tax laws.

However, one of the key players in the dispute, Senate Finance Chair Ron Wyden (D-Ore.), who had been pushing for changes, said he did not support the compromise plan.

“I don’t believe the cryptocurrency amendment language on offer is good enough to protect privacy and security, but it’s certainly better than the underlying bill,” Wyden wrote on Twitter.

One of the amendment's sponsors, Sen. Pat Toomey (R-Pa.), said they hope they get an opportunity to put the proposal to a vote, though he stopped short of assuring that. Lawmakers have been snarled in a broader fight over a number of amendments to the spending package, even as it steams closer to passage.

“Our solution makes clear that a broker means only those persons who conduct transactions on exchanges where consumers buy, sell and trade digital assets,” Toomey told reporters.

“It ensures that the bill does not sweep in software developers, crypto transaction validators, node operators or other non-brokers.”

Among those backing the plan: Sens. Rob Portman (R-Ohio), Mark Warner (D-Va.), Kyrsten Sinema (D-Ariz.) and Cynthia Lummis (R-Wyo.). A Treasury spokesperson said the agency was consulted on the changes and does not oppose them.

Treasury Secretary Janet Yellen expressed support for the proposal, saying it would "provide clarity on important provisions" that will "make meaningful progress on tax evasion in the cryptocurrency market."

The reporting requirements are aimed at improving tax compliance by requiring brokers to report to the government how much people pay for the assets as well as their gross proceeds when they sell.

The legislation’s definition of “broker” caused a fracas, with critics complaining it was overly broad and would sweep in too many unintended targets. Treasury had balked at changes, arguing the cryptocurrency industry was merely trying to water down the new rules.

The compromise plan defines broker more narrowly, as someone who "regularly effectuates transfers of digital assets on behalf of another person," with exceptions for validators and software makers.

Some in the cryptocurrency industry said they could live with the revised proposal. "It's not perfect, but better than nothing," said Kristin Smith, head of the the Blockchain Association, writing on Twitter.