On December 8, the House Financial Services Committee held an important hearing discussing digital assets and the future of this novel technology. As Congress continues to discuss what role lawmakers and regulators should play, they should avoid knee-jerk policies that threaten to stifle growth and innovation. The bipartisan infrastructure bill that was signed earlier this year included one such policy -- a new, unworkable reporting requirement. Thankfully, led by Representatives Patrick McHenry (R-NC) and Tim Ryan (D-OH), a bipartisan group of lawmakers have introduced legislation to correct the reporting requirements.
Cryptocurrencies have attracted the attention of lawmakers and regulators. In November 2021, the cryptocurrency market reached an all-time high of $3 trillion, five times the size it was last year. Accompanying the meteoric rise is increased scrutiny both in the U.S. and abroad. The rise of highly decentralized blockchain technology led to a crackdown from the highly centralized Chinese government, outlawing cryptocurrency mining and declaring cryptocurrency transactions illegal. The U.S. has a clear path to maintaining its role as the global hub of innovation, as long as it doesn’t follow suit and stifle this nascent industry.
Unfortunately, the Infrastructure Investment and Jobs Act, the recently passed infrastructure bill, included a new reporting requirement for digital assets that was unworkable. This was included as a $28 billion “pay-for” for new spending that NTU Foundation warned was yet another budget gimmick. The flawed provision included a broad definition of a “broker” that would have mandated that a broad swath of individuals, like miners and software developers, remit information to the Internal Revenue Service (IRS) despite not having access to the required tax information. The collection of personal information from users of this technology also raised privacy concerns. The overly broad definition of a “broker” threatened to create a framework that would make it impossible to comply with the regulations in the U.S. NTU supported amendments to strike this reporting provision and to clarify the language, but neither were included in the final bill.
The Keep Innovation in America Act, introduced by Representatives Patrick McHenry and Tim Ryan along with a bipartisan group of lawmakers, would correct these reporting requirements. This bill includes updating the definition of a broker and digital asset, providing more clarity for investors and innovators. The nascent sector of the economy has great potential, and the last thing lawmakers should do is cut it off at the knees. Providing clarity and a workable framework would not only ensure consumers are able to reap the benefits of innovation, but it would also reinforce the role of the U.S. as the global leader in innovative technology. Hopefully, the House moves quickly to consider this common-sense bipartisan legislation.
Congress should maintain a light-touch approach to encourage pro-growth technologies in the U.S. Some have claimed blockchain technology will create a new version of the internet and further decentralize the digital economy. However, consumers will be left guessing on what could have been if a nascent technology is hit with onerous regulations at an early stage. Regulations for regulations sake won’t benefit consumers and won’t create long term economic growth. As lawmakers continue to monitor this growing sector and increase their understanding of this technology, the Keep Innovation in America Act is a targeted and positive reform that would encourage growth, innovation, and provide clear rules of the road.