Cryptocurrency Industry Pushes Back Against Proposed Tax Regulations
The cryptocurrency realm is mounting a resilient resistance against impending regulatory proposals seeking to broaden the scope of entities obliged to disclose specific digital currency transactions. In August, the US Treasury Department posted the draft of proposed guidelines with the aim of mitigating challenges associated with the reporting and taxation of cryptocurrency transactions. However, critics now argue that such measures pose a formidable obstacle to the broader crypto market and decentralized finance, raising constitutional apprehensions in the process.
The Blockchain Association, an advocacy group for cryptocurrencies based in the United States, has sent in a comment letter mostly opposing the tax laws that the Internal Revenue Service (IRS) recommended. The group asserts that the proposed regulations reflect fundamental misunderstandings about the nature of digital assets and decentralized technology. Some of the over 124,000 letters submitted argue that the recommended rules push the definition of a broker too far in regulations brought forth during the summer.
The Blockchain Association contends that the Treasury had overreached itself with the proposed regulations, perhaps violating constitutional rights, especially those concerning freedom of speech and privacy. Marisa Copel, senior counsel for the Blockchain Association, emphasized that developers of DeFi protocols and non-custodial wallets face inherent challenges in adhering to the proposed rule. She also highlighted a crucial distinction, pointing out that DeFi software facilitates user connections but doesn’t “effectuate transactions” akin to a traditional broker. Consequently, these developers lack access to the information necessary for the prescribed reporting.
According to Kristin Smith, the CEO of the Blockchain Association, the distinct nature of the crypto ecosystem compared to traditional assets should be taken into consideration when crafting rules, ensuring they do not unintentionally encompass participants without a clear path to compliance. For her part, DeFi Education Fund CEO Miller Whitehouse-Levine, said the IRS’s current proposal is perplexing, contradictory, and misguided, as it seeks to enforce regulatory frameworks based on the presence of intermediaries in situations where they are absent.
The hearing scheduled for Monday will be conducted solely in audio format. It aims to convene notable proponents of cryptocurrency to present their perspectives on the proposed framework outlining the reporting of transactions by crypto brokers and investors to the IRS.
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