In a recent episode of the Thinking Crypto podcast, Amanda Tuminelli, the Chief Legal Officer at the Defi Education Fund, delved into the IRS and treasury’s recent rulemaking on digital asset transactions. The IRS finalized a tax reporting rule for participants in the defi industry on December 27th, which some argue is too broad to classify as a broker under the statutory definition. In response, a lawsuit was filed against the Blockchain Association and Tech Texas Blockchain Council in federal court to challenge the rule.
A Potential Pushback?
The definition of a broker, as per the TLDR, is someone who, for monetary consideration, facilitates transfers of digital assets on behalf of another individual. However, the IRS contends that front ends, which do not hold custody and simply assist users in completing transactions, could still be considered brokers. Their rationale is that any service facilitating a transaction, irrespective of the statutory definition, may fall under the broker category.
Tuminelli pointed out that while the IRS rule is slated for implementation in 2025, it is expected to be forward-looking and not impose reporting requirements until January 1, 2027.
With the upcoming pro-crypto administration, there is a possibility of pushback or revision of the rule. Congress holds the power to review the rule under the Congressional Review Act and potentially disapprove of it, preventing its enforcement before the deadline.
Optimism in the Trump Administration
Tuminelli also touched on the optimism surrounding the election of a pro-crypto President, Donald Trump, who is anticipated to take the crypto industry seriously. Additionally, the appointment of Paul Atkins, succeeding Gary Gensler known for his tough stance on crypto, could bring about significant changes. There are expectations that the SEC, under new leadership, will prioritize fair regulations to mitigate the need for fragmented legal battles.
Furthermore, Tuminelli anticipates a shift in SEC leadership with Chair Paul Atkins at the helm, potentially leading to more favorable settlements and clearer guidelines for crypto businesses. She also raised concerns about the Department of Justice’s approach to developers, particularly in cases involving tools like Tornado Cash, emphasizing the need to avoid broad criminal liability for creating software used by malicious actors.
Overall, Tuminelli maintains a cautious optimism for positive developments in 2025, hoping for increased regulatory clarity and reduced litigation within the crypto industry.