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White House Backs Crypto Rules Favoring Mining-Based Consensus Mechanisms

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The White House joined the debate over U.S. cryptocurrency regulations Thursday by signaling its support of an amendment to the Infrastructure Investment and Jobs Act (IIJA) that favors mining-based consensus mechanisms over alternative solutions.

CNBC reported that White House deputy press secretary Andrew Bates issued an unexpected statement about the amendment proposed by U.S. Senators Rob Portman (R-OH), Mark Warner (D-VA), and Kyrsten Sinema (R-WY) on Thursday to clarify the crypto-related provisions they authored in the current version of the IIJA.

"The Administration is pleased with the progress that has yielded a compromise sponsored by Senators Warner, Portman, and Sinema to advance the bipartisan infrastructure package and clarify the measure to reduce tax evasion in the cryptocurrency market," Bates said in the statement, according to the report.

The Warner-Portman-Sinema amendment was preceded by an amendment proposed by U.S. Senators Ron Wyden (D-OR), Cynthia Lummis (R-WY) and Pat Toomey (R-PA) on Wednesday. That amendment sought to loosen IIJA's restrictions on cryptocurrencies following criticism from the industry and privacy advocates.

So far discussion about the amendments has centered on the Warner-Portman-Sinema proposal specifically waiving certain rules for those contributing to proof-of-work consensus mechanisms that rely on cryptocurrency miners to maintain the integrity of a given platform. The Wyden-Lummis-Toomey amendment makes similar exceptions but also extends them to proof-of-stake consensus mechanisms.

Both mechanisms have their advantages, but proof-of-work's reliance on crypto mining makes it an energy-intensive process, which is why the environmental impact of mining Bitcoin and other cryptocurrencies has received more attention in recent months. Proof-of-stake consensus mechanisms are supposed to rely on less power.

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There have been pushes for cryptocurrency mining to become more sustainable by using renewable energy sources—nuclear power, hydroelectricity, and volcanic energy being some of the more recent examples—and some mining operations have looked to offset their environmental impact by contributing to clean energy projects.

But there's no way to guarantee that proof-of-work consensus mechanisms will use clean power, so even if cryptocurrency mining does largely shift to renewable energy sources, it's likely to continue to be criticized for requiring more electricity than proof-of-stake approaches. (Or perhaps even Chia's proof-of-space-and-time.)

Senate Majority Leader Charles Schumer pushed for an August 7 vote on IIJA with hopes to pass the legislation this weekend, The Hill reported, so the debate surrounding the bill's cryptocurrency provisions could be over sooner than later.

  • JfromNucleon
    Why have we still not moved to PoS
    Reply
  • ConfusedCounsel
    Okay, the lawyer in me is coming out, but seriously, why not just tax crypto-mining the same commodity trades are taxed. They say Bitcoin is the new gold for safe haven assets. So, tax it like a commodity. For the curious, and those not familiar with the tax code, 60% of the profits made from trading commodities are taxed as long-term capital gains (i.e. 15%) and the reaming 40% as short-term capital gains (ordinary income tax rate). Otherwise, just tax all profits made as regular income.

    Given the number of the illegal mining Tom's Hardware has reported, I suspect some miners in the US are not exactly honest enough to accurately report income to the IRS every April. I also suspect some may never bothered learning how to report income from mining. Heck it is not like Turbo Tax has page for reporting gains from crypto mining. Consequently, enforcement will be problem.
    Reply
  • cornelm1976
    Because CHINA stepped back with 1 step:
    "China is banning Bitcoin for real this time.
    Well, more accurately, it’s banning Bitcoin mining. Following bans last month in Xinjiang and Inner Mongolia, government officials have banned bitcoin mining in Sichuan (the epicenter of Bitcoin mining in the country) and Qinghai, as well as levying new, hyper-restrictive regulations on operators in Yunnan."
    Source: How China’s Bans Are Changing The Bitcoin Mining Landscape | Nasdaq
    US administrationt wants to gain the lost advantage and to catch up China economicly and financially speaking.
    Howgh! :)
    Reply