New regulation could cause a split in the crypto community

Big Crypto has arrival. On August 10, after days of wrangling and angry tweets, cryptocurrency enthusiasts, advocates and entrepreneurs watched in horror as the US Senate approved a $ 1,000 billion infrastructure bill, accompanied by ‘an article that many fear will put the entire U.S. crypto industry at risk irreparably. The controversial rule would require “brokers” of transactions in digital assets, that is, cryptocurrencies, to report their clients to the Internal Revenue Service so that they can be taxed.

The crypto crowd complained that the bill’s definition of “broker” was so broad that it potentially encompassed miners, validators, and decentralized application developers, who while playing a central role in the operation of ‘a blockchain ecosystem, have no way of identifying their anonymous users.

Initially, it appeared that the wording of the bill could be changed to exempt these categories, as a trio of senators introduced an amendment clarifying the term “broker”. Then another, supported by the White House, the amendment appeared, pushing for less lenient clarification, exempting miners from proof of work – who use a power-hungry process to secure blockchains like Bitcoin or Ethereum – but not many other categories, such as proof-of-stake validators, which perform the same function without the combustion of energy. While a compromise position was being worked out, the Senate decided to pass the bill without amendment. Any changes will have to happen at a later stage – and they likely will, given the manifest inapplicability of the bill as it stands.

At first glance, it’s a beating for American crypto. But the story that has been circulating is quite different: The infrastructure bill is a watershed moment in cryptocurrency history. Technology – basically a crypto-anarchist, anti-banking and borderline anti-government manifesto disguised as code – has finally acquired this great marker of prestige: a lobby. The fact that some senators were ready to fight the crypto wedge seems to show that the cryptocurrency industry is more than a swarm of Twitter accounts and some venture capitalists. Whatever the reason, he has influence, and after the Infrastructure Bill saga, he’ll be ready to wield it even more deftly.

“We are seeing the formalization, the maturation of the crypto lobby, and this was the first coordinated effort that brought this forward,” said Alex Brammer, vice president of business development at Luxor Tech, a bitcoin mining company. “Organizations like the Blockchain Association, the Texas Blockchain Council or the Digital Chamber of Commerce will certainly continue their work. “

Cryptocurrency is generally, and lazily, described as the Wild West, but in fact, established companies operating in the industry – from large mining companies to Wall Street-listed giants such as Coinbase – tend to crave regulation for set the limits of what is acceptable and what might get them into trouble. “Sophisticated players in this space welcome smart regulation – it provides clarity and predictability for large operations,” says Brammer. “It provides a set of rules of conduct that allows large, publicly traded companies to ensure that they are doing everything possible to be as viable and profitable as possible in the future. “

But where does that leave the smaller, less established and less corporate players? Bitcoin, an asset owned and trusted by billionaires such as Mark Cuban and Elon Musk, has been developing since 2009 to become an industry that carries the weight and recognition of the brand. (Even Ted Cruz is lyrical waxing on he).

The much-contested White House-approved amendment reportedly saved bitcoin while throwing much of the crypto under the bus. Certainly, when this plan emerged, the crypto-lobby – or, at least, crypto-Twitter – rose up against it. Jerry Brito, executive director of cryptocurrency trading group Coin Center thundered against the Senate’s attempt to pick “winners and losers,” while venture capitalist and crypto-ideologist Balaji Srinivasan claimed the amendment would ultimately open the door to a total ban on bitcoin. But it begs the question whether, in the long run, a rift might open between a Big Crypto calling for clear regulation to achieve peace of mind, and the smaller players in the cryptocurrency community, who might be. less well equipped to meet the requirements that regulations would impose.

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