The US Treasury Department has proposed updated tax rules aiming to streamline the crypto tax landscape, as reported by the Wall Street Journal.
The proposed rules, when fully implemented, will require crypto companies to communicate with the IRS in the same way traditional brokers handle stock and mutual fund portfolios. Beginning in 2026, these platforms will be required to file annual reports on Form 1099s with the IRS and taxpayers, detailing gross proceeds from transactions.
The proposed regulation extends to other digital assets, such as non-fungible tokens (NFTs) and decentralized finance platforms (DeFi). This inclusion of DeFi platforms in the tax rules has drawn criticism within the crypto industry, with the head of the DeFi Education Fund criticizing the proposal as “confusing, self-refuting and misleading.”
As mentioned before cryptostores, the IRS has consistently struggled with the unique challenges posed by cryptocurrencies. In particular, the taxation of cryptocurrency wagering rewards has proven to be a contentious issue, leading to legal disputes and calls for more precise guidance. These latest proposals appear to be another step in the ongoing effort to provide regulatory clarity, albeit one that has drawn mixed reactions from industry stakeholders.
Outrage
The proposal to tax cryptocurrency profits has been met with immediate criticism from the industry, especially for its potential impact on decentralized activities. Key industry figures have objected to the broad scope of the proposal, arguing that it could unfairly take over entities like self-hosted wallets and decentralized exchanges that may not have a clear path to compliance. Despite the potential challenges, some, such as Blockchain Association CEO Kristin Smith, have recognized the potential benefits of the proposal, suggesting that it could help everyday crypto users accurately comply with tax laws, if implemented properly.
Others, however, are not so hopeful. Miller Whitehouse-Levine, CEO of the DeFi Education Fund, said in a statement:
“Today’s proposal from the IRS is confusing, self-refuting and misleading. It tries to apply regulatory frameworks based on the existence of intermediaries where none exist.”
The IRS and the Treasury Department are accepting feedback on the proposed regulations through Oct. 30, with public hearings scheduled for Nov. 7-8, 2023.
The post Treasury, IRS is proposing crypto tax rules that define DeFi platforms since brokers first appeared on CryptoSlate.