How cryptocurrency became a powerful force in Washington

The infrastructure bill is in part stalled as negotiations proceed on how closely to regulate the crypto industry.

At 2:36 p.m. Wednesday, the message went out on Twitter: “Crypto Red Alert!”

The message, from a left-leaning tech advocacy group called Fight for the Future, urged people to call U.S. senators to object to one provision of new rules for cryptocurrencies in the massive federal infrastructure bill. Senate offices were swamped with phone calls. Opposition to the provision came from the likes of Jack Dorsey, the head of Twitter and Square, and Brian Brooks, a top banking regulator during the Trump administration who had become a key crypto executive.

And after years of debate over how to improve America’s infrastructure, and months of sensitive negotiations between the White House and lawmakers, the $1 trillion bipartisan infrastructure proposal suddenly stalled in part because of concerns about how government would regulate an industry best known for wild financial speculation, memes — and its role in ransomware attacks.

Sen. Rob Portman (R-Ohio) and the Biden administration had agreed on a proposal that would give federal regulators authority to impose new tax reporting obligations on cryptocurrency brokers, which enable traders to buy and sell cryptocurrency. The crypto provisions emerged as lawmakers struggled to find ways to pay for the bill, with nonpartisan estimates suggesting the tax changes — which would codify work the Internal Revenue Service was beginning to undertake — would increase federal revenue by about $28 billion over 10 years.

But an odd-couple coalition of liberals concerned about government overreach into tech and conservatives skeptical of financial regulation have pushed back strongly against the plan, which, they argue, would harm innovation.

More From The Washington Post (subscription required):