The Summer Olympics end this weekend and, in a breathless six months, the world will turn its eyes to the Winter Olympics in Beijing. At that time, China plans to turn our attention to something else entirely: its new central bank digital currency.
China, Europe, Singapore and other nations are well ahead of the United States in implementing financial technology like central bank digital currencies and digital assets into their economies. While America has a heritage of being the global leader in financial services, that position is a privilege, not a right. The enormous wealth and opportunity that our leadership has given us could be swept aside in future generations if another country out-innovates us.
This brings us to the current Senate debate over infrastructure, and a “pay-for” provision that would generate billions of dollars to help cover a massive $1.2 trillion spending package.
The provision in question is one of the first times that the Senate has been required to grapple with the opportunities and risks of digital assets. To his credit, the infrastructure bill’s co-sponsor, Sen. Rob Portman (R-Ohio), took a stab at raising the very important issue of ensuring tax compliance in digital asset markets. Everyone should be paying the taxes they owe under the law and I support the spirit of this provision. I was grateful that Sen. Portman worked with me over the past weekend to change the language currently in the bill. It’s come a long way, but even with these changes, it isn’t quite ready to become law.
There is an alternative: The Lummis-Wyden-Toomey amendment, sponsored by Sens. Ron Wyden (D-Ore.), Pat Toomey (R-Pa.) and me. Simply put, this amendment clarifies in law what most of us already believe — that validators of distributed ledger data, like miners for example, or hardware wallet providers and software developers, should not be required to report transaction data to the Internal Revenue Service. This is common sense, because these individuals are not the ones conducting financial transactions — they are simply creating financial tools.
The most important thing our amendment does is to say in plain English what the law means. This is so important to start-ups, small business owners and ordinary Americans who want to take a risk on their idea. In many cases, these Americans can’t hire a fancy tax lawyer to tell them what a complicated law means.
Unfortunately, Sen. Portman, Sen. Mark Warner (D-Va.) and the White House have concocted an alternative amendment that would devastate certain digital assets and the technology protocols that drive them. Instead of creating a level playing field, it would pick winners and losers by targeting proof-of-stake mining. In a nutshell: This would radically harm Ethereum 2.0, for example.
The current fight over digital asset regulation is unfortunately happening at a break-neck speed because, instead of working on this regulation in committee, it was first added as part of a backroom deal without the insight of stakeholders and interested parties. This is a recipe for disaster.
I co-founded the Financial Innovation Caucus with my colleague and friend, Sen. Kyrsten Sinema (D-Ariz.), in order to educate our fellow senators about digital assets and the incredible opportunity that financial technology offers. But we need to get this right. Sens. Wyden, Toomey and I authored this amendment because we care deeply about the future of American innovation and want to see thoughtful debate and good public policy around these issues. If we fail now, it will have a real impact, not only on innovators today, but by threatening to cede tomorrow to a host of others on foreign shores.
Cynthia Lummis is the junior senator from Wyoming.