On August 10, the United States Senate voted to pass a $ 1 trillion bill to revitalize American infrastructure. From the perspective of the crypto community, especially miners, the Senate’s push into crypto legislation was a disaster. If the language in which brokers are defined in the bill is not clarified, it will single-handedly thwart the growth of a domestic industry as it gets off the ground.
As written, the bill allows several interpretations of the term “broker”. In the English language, there is no real controversy – or ambiguity – about what a broker does. According to the Merriam-Webster online dictionary, a broker is “someone who acts as an intermediary: like […] an agent who negotiates sales and purchase contracts (in relation to real estate, goods or stocks). ”In traditional finance, brokers buy and sell financial assets such as stocks and bonds for their clients. Compare this to the miners of Bitcoin (BTC), the dominant cryptocurrency. Unlike brokers, Bitcoin miners solve cryptographic puzzles in order to validate new blocks, an essential activity for the operation of the Bitcoin network. The miners receive Bitcoin as compensation for providing this computing power. So they are definitely not brokers.
Related: To be clear: blockchain technology is infrastructure
Unfortunately, the bill passed by the Senate contains too broad and ambiguous wording in its definition of “broker”:
“Any person responsible (for a fee) for the regular provision of services that effect transfers of digital assets on behalf of another person.”
A threat to the BTC mining industry
In defining a broker in this way, the bill requires mining companies to provide regulators with the same information that a stockbroker is required to provide, such as the transaction. Put simply, miners have no way of gathering this information as they are only validating the blocks, not the information they contain. If miners are considered brokers in the sense of that language, they could not be complying with the law. This uncertainty, whether intentional or not, poses an existential threat to the U.S. bitcoin mining industry.
Crypto mining is critical to the functionality of proof-of-work cryptocurrency networks, of which Bitcoin is the most notable. Without mining, many of the revolutionary aspects of blockchain technology would not be possible. For example, aspects such as decentralization, accountability, verification and security are enabled by mining. There is no Bitcoin network without mining.
The US crypto mining industry is currently expanding. Features like stable government, cheap energy, excess land, and a strong economy have made the country an attractive location for crypto miners. The adoption of Bitcoin is increasing by both individuals and companies – with its introduction, US industry is increasing the employment of finance professionals, software developers, engineers, marketers and facility managers.
Related: Broker licensing for US blockchain developers puts jobs and diversity at risk
Many Americans hold Bitcoin balances, and many people around the world use Bitcoin to transfer income and assets to families in different countries. Citizens of countries with poorly managed currencies trust the Bitcoin network to maintain their purchasing power in the face of rapidly depreciating currencies. In short, the United States is a major player in a rapidly growing market that is adding value to millions of people. And that role is growing as China, not trusting the decentralized, market-based ethos of Bitcoin, has moved to stop mining within its borders.
Related: The practice in China shows that industrial Bitcoin mining is a problem for decentralization
The Senate bill snatches defeat from victory. Just as U.S. crypto mining will expand exponentially, the uncertainty caused by the ambiguous language of the bill is hindering investment. We have experienced this first hand in our company. Employment, wages and the resulting consumer spending have been put on hold because of the bill – a sad irony since the purpose of the bill is to support economic growth and job creation.
Unless the wording in the bill is changed to make it clear that miners are not brokers, the United States will miss out on several benefits that crypto mining offers, such as: Crypto mining improves network stability by helping utility companies balance supply and demand. Miners maximize their profits when energy is cheap and plentiful, and generate income from utility companies when prices are low. When energy demand rises and prices rise, crypto miners stop mining, which releases supplies of energy to the grid and lowers prices for other users.
Crypto mining and energy consumption
The tale that crypto mining is wasting energy has it all. Crypto mining doesn’t waste energy, it uses energy that would otherwise be wasted. Energy producers do not perfectly match their production to supply and demand. Energy is often generated and not consumed because supply and demand do not match and / or is lost due to long-distance transmission.
Related: Green Bitcoin: The Impact And Importance Of Energy Use For PoW
The cheapest miners are located near the utility’s power supply. The Bitcoin that these miners “produce” does not generate any additional need for additional energy, but consumes energy that would be produced anyway. In addition to providing investment and jobs for the local economy, crypto miners are therefore promoting a more robust grid, reducing energy waste, and generating income that utilities can use to switch operations from fossil fuels to renewable energy sources.
There is still hope
Given these and other benefits, the Senate’s broadside against crypto mining is both puzzling and debilitating. But there is still a chance the US House of Representatives will rectify the unfortunate language. Although the proposed changes to the Senate Infrastructure Act were not adopted, the fact that it was offered at all shows that there is some support for crypto mining in the Senate. The House of Representatives can pass another infrastructure law. In this case, it is possible for House and Senate negotiators to come up with a final bill clarifying that crypto miners are not brokers. This would be the best result for industry and business.
Crypto mining is going to happen somewhere because the demand for Bitcoin and other cryptocurrencies is increasing. It would be better for the US economy and the environment if the crypto mining industry continued to expand domestically. The first step in making the US a leader in crypto mining is to make it clear that miners are not brokers. The failure will have long-lasting consequences and will prevent the United States from becoming a leader in this fast-growing industry.
This article does not provide investment advice or recommendations. Every step of investing and trading involves risk, and readers should do their own research when making a decision.
The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.
William Szamosszegi is CEO and Founder of Sazmining Inc., a cryptocurrency mining developer and advisory company, and host of All About Crypto Mining: The Sazmining Podcast. He is optimistic about the future of Bitcoin as the dominant global digital reserve asset and believes that Bitcoin is the first-level solution to solid money. William grew up in Maryland and studied psychology and management at Bucknell University. William spends his free time doing sports, meeting friends and reading.