“I remember watching the hearings before the Energy and Commerce Committee with Mark Zuckerberg, and it was clear that a lot of my colleagues didn’t really know a lot about technology,” recalls U.S. Representative Darren Soto.
When Soto (D-FL) speaks about technology, it sounds personal. He references space launches at Cape Canaveral, which lies adjacent to his district, Florida’s 9th. It is, he mentions, also home to Disney World and Universal, which have made it a major hub for virtual reality as well as vacationers.
A co-chairman of the Blockchain Caucus and sponsor of several closely pieces of blockchain legislation, Soto is one of the main figures shaping crypto policy inside of Congress. But he is concerned that Congress’s lack of understanding of emerging technology is holding the U.S. back from building a competitive cryptocurrency sector.
Soto spoke with Cointelegraph regarding recent moves on Capitol Hill as well as his interests within the Blockchain Caucus and work with emerging technologies.
Blockchain Caucus pushes for greater crypto guidance from the IRS
Soto, along with several other members of Congress, recently wrote to the IRS asking the tax agency not to overestimate staking rewards when it comes time to collect taxes. Ultimately, the letter aims to get the agency to forgo taxing staking rewards until network validators actually try to sell their tokens.
Regarding the IRS letter, as well as a similar request for guidance in December, Soto said:
“We need to have increasingly greater guidance from the IRS so people know in advance what they’re going to know, the consequences of their obligations for each transaction.”
Digital and Token Taxonomy Acts
The Blockchain Caucus is a relatively new entity. Its members don’t present legislation internally, instead relying on their other committee assignments to move laws forward. With cryptocurrencies, that’s a tricky proposition because as a subject it doesn’t fall neatly within a single committee’s purview, nor even within a single regulator’s.
The need to navigate a complicated system of financial and technological governance, Soto said, is the reasoning behind both the Token Taxonomy Act and the Digital Taxonomy Act, on which he is co-sponsor and sponsor, respectively:
“There’s a lot of committees with some part of this, which is why we put together our Token Taxonomy Act as well as our Digital Taxonomy Act, because we have to cover all those areas and really create a new setup. And that’s the goal: to establish jurisdictions and create a new digital asset, because cryptocurrency — because it has so many facets — is unlike any financial definitions we already have under existing law many of the statutes passed decades ago if not a hundred years ago.”
The two pieces of legislation are something of a one-two punch. The Token Taxonomy Act would put definitions on which tokens actually represent investment contracts and fall under the purview of the Securities and Exchange Commission. The Digital Taxonomy Act looks to put the Federal Trade Commission in charge of deceptive practices related to the exchange of the decentralized tokens that don’t qualify as securities.
Both bills have been in-process with their committees since last April, however. Relative to the speed at which non-emergency legislation makes its way through Congress these days, that’s not terribly surprising, but it’s also a long time to monitor them. While Soto foresees new progress on both later this year, he is anxious for their passage to lead to a more robust American cryptocurrency industry:
“We’re not there yet, which is what the Digital Taxonomy Act and Token Taxonomy Act are about. I continue to be concerned about many startup cryptocurrency firms having to spend half their money on legal. And I say that as a commercial attorney. That’s not going to sustain us in the long term.”
Education and regulation: “Ignorance is our main opposition”
In addition to pressuring agencies like the IRS to put out guidance, the Blockchain Caucus focuses on educating other areas of Congress, where members are less engaged with technologies including cryptocurrencies. And how’s progress on that?
“Well, slowly but surely, we’re doing it. It’s going to be a slog. I think we all realize that our opposition is not partisan in nature. It’s basically educating the members. Ignorance is our main opposition right now.”
High-profile encounters between crypto and lawmakers like last summer’s controversy over Facebook’s proposed Libra stablecoin serve as teachable moments, but often education gets sidetracked by other political concerns. In that case, Soto noted that:
“The Libra controversy really was more about Congress’s friction and frustrations with Facebook than it was about cryptocurrency itself, although there are people who get scared about having parallel currencies. But I remind everybody, we have gold, we have other countries, currencies, silver, commodities stocks. There are multiple different parallel currencies and units of value out there.”
Lawmakers’ rising hostility to tech
Soto referred back further, to hearings in 2018 with Mark Zuckerberg before the Energy and Commerce Committee — of which Soto was and remains a member. That hearing, as well as one before the Senate the day before, focused on Facebook’s use of user data.
In many ways, those hearings were part of a broader sea change that has seen Congress increasingly suspicious and even antagonistic towards technology. To be fair, Big Tech has spent a long time pulling shady business with impunity. But as for Soto, he’s worried that many members lack the knowledge to put together best practices for governing technology. Speaking on the broader mission of the Blockchain Caucus:
“We have made a concerted effort over the past couple of years to get involved in technology generally, whether it’s artificial intelligence, commercial space flight, Internet privacy or cryptocurrency, quantum computing.”
Interesting to note is that the Blockchain Caucus only dates to 2018, and much of the caucus’ leadership are themselves relatively recent elects to the house — Soto, for example, began his first term in 2017. When contrasted with the surrounding Congressional culture, it seems to have some of the punchiness and enterprise usually associated with start-ups.