Crypto industry blindsided by US Infrastructure Bill: Chervinsky
The Treasury Department is influencing the infrastructure bill to gain jurisdiction over the DeFi industry, says the advocate
Jake Chervinsky, the General Counsel for FinTech company Compound Labs, has spoken up against the United States Senate’s hasty passing of the Infrastructure Bill 2021, calling it a move that blindsided the crypto industry.
In a conversation on the Bankless State of the Network podcast, Chervinsky cautioned that the infrastructure bill’s vague tax reporting provisions have more to do with the Treasury Department's desire to “capture DeFi” (decentralised finance).
The DeFi Chair of the Blockchain Association pointed out that discussions around the infrastructure bill initially had nothing to do with crypto. Chervinsky believes that the later shift to including harsh tax reporting requirements for cryptocurrency might have been a result of the Treasury Department’s influence in the legislative process
The Treasury Department has been looking for alternative ways to impose the controversial self-hosted crypto wallet regulations on the industry since US President Joe Biden froze the implementation of the FinCEN rules upon taking office.
“This is all about DeFi […] This is the Treasury Department trying to work out how to get jurisdiction over DeFi […] and also expand its warrantless surveillance over a peer-to-peer financial system,” Chervinsky stated.
One of the key advocates for effective crypto regulation, Chervinsky also stated that the Treasury department has influenced the opposition to the language change amendment that tried to exempt network validators and specify that only centralised exchanges would come under the provisions of the bill as the altered bill cannot “adequately capture DeFi”.
They feared that it could be argued that DeFi participants could be considered network validators and hence be exempted from the bill, he added.
He further pointed out how a competing amendment approved an exemption for Proof of Work miners only, despite all the environmental costs of such mining, but unreasonably refused such an exemption for Proof of Stake validators.
“The Treasury Department had played an important role in drafting the language and also [ensuring] that any revision we proposed was going back to the Treasury Department for their approval or rejection,” the advocate explained.
The Infrastructure Bill with its last-minute additions for crypto tax reporting was passed by the Senate last week. If implemented, its vague provisions and harsh reporting requirements are expected to have severe consequences for crypto miners, validators and wallet developers.
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Harshini Nag, @KhareemSudlow