This year, the rising cryptocurrency lobby has spent $2.4 million, funnelling millions of dollars to D.C. in opposition to the bipartisan Senate infrastructure plan that was passed on Tuesday.
Senators vetoed proposed modifications to a section aimed at putting reporting obligations on the cryptocurrency business prior to the bill’s adoption. The cryptocurrency industry is on track to nearly treble its lobbying budget of $2.8 million in 2020.
The industry’s lobbying efforts to remove the new reporting requirements from the bill’s final version were unsuccessful. The bill establishes tax reporting standards for the $2 trillion cryptocurrency business, which is expected to generate an estimated $28 billion in income to fund infrastructure projects such as $110 billion for roads and bridges and $65 billion for broadband. The clause requires cryptocurrency agencies and digital currency “brokers” to report their digital asset transactions to the IRS. Currently, there is no tax compliance regulation in place in the industry.
Cryptocurrency organisations believe the provision jeopardises the development of decentralised financial systems by imposing reporting requirements on software developers and cryptocurrency “miners” — individuals and organisations that use computing processes to generate digital coins — that they cannot realistically meet.
The lack of a centralised banking system in cryptocurrency, combined with blockchain transactions, makes tracing information to one individual nearly hard.
Ripple Labs, a cryptocurrency firm, spent the most on lobbying on the topic during the first six months of 2021, spending $550,000. In early May, Ripple also added former US Treasurer Rosa Rios to its board of directors. Stellar Development came in second place, spending $330,000.
Rios is not the first former government official who has been employed by a leading bitcoin startup this year. Former Senator Max Baucus (D-Mont.) now advises cryptocurrency exchange company Binance, while Faryar Shirzad, a former White House National Security Council staff member and former Goldman Sachs co-head of government affairs, works for Coinbase, a cryptocurrency firm that has spent $160,000 on lobbying this year.
Aside from recruiting former government officials, bitcoin companies have increased their lobbying hiring dramatically over the last five years, from one lobbyist in 2016 to 60 this year.
According to Kristin Smith, executive director of the Blockchain Association, while the provision “has undoubtedly been a wake-up call to crypto,” the quick action taken by lobbyists and agencies to combat the clause has proven that “crypto is more of a force than anybody ever expected.”