Crypto lobbyists handed setback as House blocks tax rule changes

House Democrats on Tuesday blocked attempts to scale back digital currency tax rules tucked into President Joe Biden's infrastructure plan, in a new setback for crypto industry advocates fighting the proposal.

The House Rules Committee, which drafts the terms of debate for bills headed to the floor, agreed to a process that would prohibit any amendments from being considered for the infrastructure bill. The full House voted 220-212 to lock in the procedure through a resolution approved on Tuesday afternoon. The plan also sets up a floor vote on the infrastructure package by Sept. 27.

The House closed the door to infrastructure bill changes despite calls from Democrats and Republicans to pare back the cryptocurrency tax proposal that the Senate passed as part of the legislation earlier this month.

At issue in the fight are proposed requirements that would force cryptocurrency exchanges and other firms to report transaction information to the Internal Revenue Service, similar to rules in place for stock brokers. As drafted, industry lobbyists and sympathetic lawmakers say the plan threatens technological innovation and the viability of a growing sector of the U.S. economy.

Crypto industry groups are now considering other legislative vehicles to revise the policy, after being blindsided by its inclusion in the infrastructure bill. One possibility is Democrats' $3.5 trillion budget package, said Michelle Bond, CEO of the Association for Digital Asset Markets.

“The industry’s biggest test will lie in efforts to forge positive relationships in Washington," Bond said.

Rep. Anna Eshoo (D-Calif.), one of the Democrats who had pushed for changes to the crypto bill language, said in a statement on Tuesday that "I continue to explore all options to improve the flawed cryptocurrency language in the Senate’s bipartisan infrastructure bill, including through the budget reconciliation process or standalone legislation."