The US Internal Revenue Service said DeFi brokers must adhere to long-standing securities rules, disagreeing with industry sentiment calling for different regulations for digital assets.
Updated rules from the IRS published On December 27, some “deFi intermediaries” will be directed to operate like traditional financial institutions by collecting certain data on user activity and reporting on cryptocurrency returns.
Final rules apply to "front-end" Decentralized finance Operators, referring to service providers that directly manage websites used to access web3 platforms such as decentralized exchanges for both US and non-US participants.
So-called DeFi brokers will also have to report all digital assets, incl NFTs and stablecoins. The revised framework will level the playing field among taxpayers and standardize reporting requirements for all participants, said Aviva Aron-Din, acting assistant secretary for tax policy.
Cryptocurrency industry leaders have discussed which digital assets fall within the scope of current securities laws, stressing that the industry requires different rules. The IRS, in a joint statement with the Treasury Department, completely disagreed with that assertion.
The Treasury Department and the IRS do not agree that DeFi participants should be excluded from the information reporting rules under Section 6045 due to a lack of experience in financial services or an alleged lack of comprehensive regulatory oversight. Technologically savvy people who run a financial services business or business must adhere to the same rules as anyone else who runs a financial services business.
IRS and Treasury
The IRS released proposed DeFi/crypto tax reporting policies in August 2023, with revised documentation to include exchanges in its compliance guidelines. unveil Soon after. Cryptocurrency commentators have opined that DEXes like Uniswap may have to share KYC information, such as names and addresses, with authorities.
Industry leaders fought the agency's initial tax proposal last year, and Bill Hughes, senior attorney at ConsenSys, expects the same to happen again. He added: “The outgoing administration does not leave quietly. “The fighting continues,” Hugh said via X.
A major concern held by cryptocurrency users is that most DeFi protocols cannot comply with securities laws, and that privacy will be almost non-existent under the new laws.
Digital asset advocacy groups, such as The Blockchain Association, have promised “aggressive action” against the IRS’s policies, suggesting that pressure in Congress and perhaps lawsuits may ensue. Without opposition, the final rules will take effect by January 1, 2027.
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