National-security officials are warning that the crypto provision in the $1 trillion bipartisan infrastructure bill proposal could push illicit cryptocurrency transactions into markets where the US government has no reach, reported the WSJ.

Like some industry participants, national-security officials feel this will only add to the threat to American individuals, companies, and government agencies.

As we reported, the bill with its broad definition of “broker” that covers even miners, developers, and stakers to report the gross proceeds along with the names and addresses of the parties to the Internal Revenue Service, is currently in the House.

The IRS intends to capture billions of dollars in tax revenue through this crypto tax provision.

Given that developers, miners, and other parties do not have the required information to report, the crypto community pushed back hard against the bill and got support from some Senators.

According to crypto supporters, including market participants and now some intelligence and law-enforcement officials feel if the bill gets passed, it will drive economic activity overseas; as such, they are now “warning policy makers against overly aggressive regulations that risk exacerbating national-security hazards.”

Republican Senator from Wyoming Cynthia Lummis, an ardent supporter of cryptocurrencies and a bitcoin holder since 2013, was also involved in introducing an amendment to the bill in the Senate, which was blocked due to one single vote.

Her state has also been at the forefront of regulating the fast-evolving digital asset sector after passing crypto-friendly laws, including laying the groundwork for the chartering of Wyoming’s crypto banks, or SPDI banks — the first fully regulated financial institutions in the U.S. that hold crypto in addition to fiat currency.

“Wyoming, in fact, had so successfully innovated in this regulatory and legislative space that it was ready for prime time, in a very big way,” said Lummis in an interview, who cites Wyoming as a model for federal regulation of the $2 trillion crypto market.

According to Chris Rothfuss, a Wyoming state senator who chairs the chamber’s blockchain committee, the state needs to do something that doesn't depend on waning industries, and “cryptocurrency provides an alternative store of value as well as the technology that diversifies our economy,” he said.

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