Crypto stakeholders are up in arms as the U.S. Department of the Treasury and the Internal Revenue Service (IRS) finalize new reporting rules for decentralized finance (DeFi) brokers. The new rules, as outlined in a recent press release by the Treasury Department, do not impose additional taxes on crypto assets. However, they do require DeFi brokers to report on the gross proceeds of sales of their digital assets, bringing them in line with the reporting requirements for traditional securities brokers.
Under the new rule, owners of digital assets engaging in DeFi transactions will also receive the same form from their broker. Aviva Aron-Dine, the Assistant Secretary for Tax Policy, emphasized in the press release that these regulations aim to ensure taxpayer compliance. She stated, “These regulations will help ensure that all taxpayers play by the same set of rules and have access to the information they need to file their taxes accurately. Aligning tax reporting requirements for digital assets with reporting for other assets will make filing easier and cheaper for compliant taxpayers while also helping close the tax gap.”
However, not everyone is pleased with the new rule. Kirstin Smith, the CEO of the nonprofit crypto advocacy group Blockchain Association, took to social media to express disappointment, claiming that the move is the Biden Administration’s attempt to harm the industry before pro-crypto politicians take power. She stated, “Today’s broker rulemaking by the IRS and Treasury – days before the end of the year – is a disappointing, but expected, final attempt to send the American crypto industry offshore. On behalf of the industry, we’re prepared to take aggressive action to fight back. We also look forward to working with the new pro-crypto Congress and Administration to roll back this and other anti-innovation rules.”
Prominent crypto lawyer Jake Chervinksy also criticized the decision, calling it “unlawful” and urging for its reversal. He stated, “IRS has finalized the second half of its broker rule, requiring most DeFi front-ends to KYC (know your customer) users starting in 2027. This unlawful rule is the dying gasp of the anti-crypto army on its way out of power. It must be struck down, either by the courts or the incoming administration.”
As the crypto industry continues to navigate regulatory challenges, stakeholders are gearing up to push back against what they perceive as detrimental rules. With tensions running high, the future of DeFi reporting regulations remains uncertain. Stay tuned for more updates on this developing story.