Bipartisan Crypto Action Seen With New IRS Reporting Fix; Grayscale And SEC Argue

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bipartisan crypto bill – house

A new bipartisan House bill announced yesterday will try to push through changes to egregious crypto broker definitions attached to the Infrastructure Investment and Jobs Act in 2021. The way it was written at the time, miners, stakers, hardware and software wallets as well as software developers would be on the hook for providing tax reporting documents to the IRS.

House Financial Services Chair Rep. Patrick McHenry (R, NC) and HFS committee member Rep. Ritchie Torres (D, NY) are co-sponsoring the new bill titled “Keep Innovation in America Act” and according to a quote from Chair McHenry, it “will fix the poorly constructed digital asset reporting requirements included in the Infrastructure Investment and Jobs Act.”

Co-sponsors are bipartisan, too: Reps. Warren Davidson (R, OH), Ro Khanna (D, CA), Darren Soto (D, FL.), Eric Swalwell (D, CA), House Majority Whip Tom Emmer (R, MN), Rep. French Hill (R, AR) and Rep. David Schweikert (R, AZ). Read more from Punchbowl News.

This is one of those “low-hanging fruit” bills/changes that could get crypto legislation momentum going – it’s generally perceived as small and hard to argue with. (Read what a staffer said last August about this change.) It may also help re-ignite bipartisan crypto interest which has sagged since the FTX collapse in November.

Tip: With the bipartisan support, seeds of the still-unannounced Congressional Blockchain Caucus for the 118th Congress may be appearing. Everyone attaching their name to this bill – except Rep. French Hill – was part of the caucus in the last Congress.

bipartisan crypto bill – background

Last August,  a digital assets reporting bill, with a similar theme to the McHenry-Torres effort, made its way to the Senate floor with co-sponsors Sen. Rob Portman (R, OH), Sen. Mark Warner (D, VA), Sen. Kyrsten Sinema (I, AZ) and Sen. Cynthia Lummis (R, WY) and Sen. Patrick Toomey (R, PA).

The 117th Congress ended before any vote was undertaken.

Tip: Perhaps this group of Senators (minus Portman and Toomey who both retired) will shepherd the McHenry-Torres bill on the Senate side.

crypto mining hearing

Yesterday’s 2-hour crypto mining hearing before the Senate’s Environment and Public Works’ Subcommittee on Clean Air, Climate, and Nuclear Safety brought together the “pro” and “con” arguments of crypto mining – specifically around Bitcoin and its Proof-of-Work process. At stake was Subcommittee Chair Sen. Ed Markey’s (D, MA) Crypto-Asset Environmental Transparency Act, which looks to “crack down” on crypto energy usage. The other side of the argument was led by Ranking Member Sen. Pete Ricketts (R, NE).  See the archived video.

Among the witnesses:

    • Anna Kelles, Assemblymember, New York State Assembly (testimony – PDF)
    • Rob Altenburg, Senior Director, PennFuture (testimony)
    • Courtney Dentlinger, VP, Nebraska Public Power District (testimony)

Ms. Kelles and Mr. Altenberg supported Sen. Markey’s bill and its reporting requirements for miners. Mr. Altenberg said that the lack of transparency inhibited the ability to fairly regulate the crypto mining industry. And Ms. Dentlinger, who worked under Sen. Ricketts when he was Governor of Nebraska, discussed crypto mining’s benefits.

crypto mining hearing – member Q&A

Among other members of Congress at the hearing, Sen. Tom Carper (D, DE) expressed concern about the impact of mining on the environment and his support for the transparency Sen. Markey’s bill afforded. (See video beginning at 1:14:45)

Sen. Cynthia Lummis (R, WY), co-sponsor of the Responsible Financial Innovation Act (RFIA),  took her 5-minute Q&A time to express a skeptical view on the need for the legislation.  See the video of her Q&A. She said in a statement, “[The Biden Administration] shouldn’t be picking winners and losers in what industries can use our energy grid.”

Read a summary of the hearing from Courthouse News Service.

Tip: Given the divided Congress, this bill would seem to have more success in Democratic state legislatures – unless there’s some horse trading in Congress and it gets added to, say, a stablecoin bill to guarantee passage in the Senate with its Democratic majority.

Gensler not worried

“Do you know that MiCA doesn’t even cover Bitcoin?,” said SEC Chair Gary Gensler, who takes a shot at European Union legislation in an interview with Politico’s Sam Sutton and Declan Harty. Chair Gensler states that he’s not worried about losing U.S. crypto business to the European Union and its new Markets in Crypto-Assets (MiCA) law or, it would appear, any other jurisdiction. Also, the Chair wants to work on artificial intelligence regulation, too. Read this one.

Question: Is there a Chair of the SEC that has ever done so many interviews?

SEC vs Grayscale trial

Opening arguments of Grayscale’s lawsuit against the Securities and Exchange Commission (SEC) took place yesterday and judges were expressing skepticism of the SEC’s point-of-view. CoinDesk’s Nikhilesh De reports, “Judge [Neomi] Rao asked a number of questions about futures prices, contrasting with spot prices: ‘It seems to me that [what] the Commission really needs to explain is how it understands the relationship between bitcoin futures and the spot price of bitcoin … (…) where’s the gap in the Commission’s view?'” Read more.

Meanwhile, “FTX Debtors” sued Grayscale and DCG yesterday saying shares of Grayscale Bitcoin Trust (GBTC) “would be worth $550 million, or 90% more if the asset manager reduced fees and allowed redemptions,” according to The Block. FTX debtors claim a violation of the Trust agreement. Read more.

ACH suspended

USDC stablecoin issuer Circle has shut down ACH (automated clearing house) payments for Dapper Labs, makers of NBA Top Shot NFTs.  Read more on Blockworks. It’s not clear yet why Dapper’s ACH payments will no longer be accepted by U.S.-based Circle – rumors swirl that it could be related to the implosion of crypto/fiat rails provider Silvergate Bank.

Blockworks explains, “ACH payments are a type of electronic funds transfer (EFT) that allows money to be moved from one US bank account to another. Dapper has said it’s attempting to secure a new partner for ACH payments as well as enabling withdrawals directly to credit and debit cards.”

cybersecurity and digital assets

Last week, the White House released its National Cybersecurity Strategy for 2023.  Part of the strategy: “Our approach will also include targeting the illicit cryptocurrency exchanges on which ransomeware operators rely and improving international implementation of standards for combatting virtual asset illicit finance.” Download the strategy here (PDF).

In an op-ed published in The Hill yesterday, Katherine Ledesma. who worked in the Cybersecurity and Infrastructure Security Agency from 2017-2020, is supportive about the new strategy and says it “makes the best business case for cybersecurity investment and coordination that we’ve seen yet in a comprehensive government strategy document.” Read more.

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