Last year, an infrastructure bill signed by president Biden included new regulatory requirements that could adversely affect the bitcoin industry.
The massive infrastructure bill, which was mostly about non-bitcoin related issues, raised red flags and worried industry experts. It contained vague language that could potentially classify bitcoin miners, wallet providers and even bitcoin software developers as brokers.
This is due to the fact that wallets, the bitcoin software and mining are all necessary components of bitcoin transactions. Without them, bitcoin transactions couldn’t take place.
But regulators seemed to have misunderstood how bitcoin works, because the infrastructure bill implied that wallet providers, miners, full node operators or even software developers could somehow perform KYC and AML procedures and collect transaction details from people using bitcoin.
The big problem is of course that neither software developers, miners, full node operators nor multi-signature wallet providers like Nunchuk actually have any way of accessing this information.
For example, Nunchuk is just a piece of software people can download and use to leverage bitcoin’s built-in multi-signature key signing capability. There is no way for Nunchuk to collect customer details, perform KYC or report transaction details to authorities.
This is even more true for miners and full node operators, which are validating transactions without having a direct relationship with a “customer”. They are simply securing the bitcoin network, but classifying them as brokers would put them in a situation that would make it impossible to comply with, essentially forcing them to operate illegally.
Senator Cynthia Lummis and other bitcoin proponents like Ted Cruz began fighting back against the vague language included in the infrastructure bill. A last-minute attempt to amend the bill failed when senator Richard Shelby made it conditional for his “vote” to add $50 billion in military spending to the infrastructure bill.
When this request for increased military spending was declined, Richard Shelby said “no” to the amendment, which would have required an unanimous vote.
A renewed effort is made by Senators Pat Toomey, Cynthia Lummis, Rob Portman, Kyrsten Sinema, and Mark Warner to exclude bitcoin miners and developers from tax reporting requirements that would be impossible to comply with. According to Bloomberg they introduced new legislation on Wednesday.
Although the Treasury Department mentioned in the past that it supports not classifying miners, developers and other “ancillary parties” as brokers, pro-bitcoin politicians don’t want to have to take the Treasury Department’s word for it.
If these “parties” are to be excluded from the classification as brokers, the vague language in the bill should be changed and it should be clearly identified what a broker is and what types of operators are excluded.
