- The U.S. Treasury’s new IRS rule forces crypto platforms to track and report all transactions, including sales of NFTs and stablecoins
- The crypto industry has expressed fierce backlash against the rule, and legal battles are looming over its survival
- The rule is expected to face challenges in court and potential disapproval from Congress under the incoming Trump administration, which has pledged pro-crypto policies
The crypto community is abuzz with reactions to the new rule implemented by the U.S. Treasury, which brings the entire crypto industry under IRS supervision. This regulation mandates crypto platforms to track and report all transactions, sparking a wave of resistance from industry stakeholders and setting the stage for potential legal battles.
Crypto Industry Shaken by IRS Oversight
The U.S. Treasury’s comprehensive IRS rule insists that crypto platforms monitor and report every transaction, thereby sparking intense backlash from the industry and looming legal battles over its implementation. This regulation has the potential to shake the crypto industry to its core, with its survival at stake.
Expansion of IRS Reach in Crypto Sphere
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have finalized new, sweeping regulations for brokers facilitating digital asset transactions. This rule, set to be published in the Federal Register on Dec 30, requires brokers, including certain decentralized finance (DeFi) platforms, to track and report user activity related to all digital assets, extending even to non-fungible tokens (NFTs) and stablecoins.
Legal Challenges Anticipated
The crypto community is preparing for a legal storm. Bill Hughes, Senior Counsel at Consensys and a vocal figure in the crypto space, has warned that legal challenges are imminent. The rule is likely to face lawsuits and potentially be disapproved during Congressional review.
Broadening Definition of Brokers
The finalized rule expands the definition of brokers, encompassing trading front-end services, custodial wallet providers, and decentralized exchanges involved in digital asset sales. The IRS identifies decentralized finance front-end services as brokers if they facilitate transactions, despite not directly custodying assets. These platforms must adhere to the same standards as centralized exchanges and maintain records for seven years.
Treasury’s Defending Argument
The Treasury justifies this expansion with the aim to align tax reporting in the digital asset space with the requirements imposed on traditional securities brokers. They propose that these measures are crucial to closing the tax gap and enhancing transparency in digital asset markets.
Crypto Industry’s Counter-Arguments
Critics, including lawyer Jake Chervinsky and Caitlin Long, founder of Custodia Bank, have condemned the regulation, arguing that it overreaches its authority. They suggest that it needs to be struck down by either the courts or the incoming administration due to its potential to undermine the U.S. crypto industry.
The Incoming Trump Administration’s Stance
President-elect Donald Trump, due to take office on Jan 20, 2025, is slated to implement pro-cryptocurrency policies, marking a significant shift from the Biden administration’s stance. Trump has committed to ending the perceived anti-crypto crusade of the Biden era and aims to solidify the U.S. as the global capital of crypto.
Conclusion
The new IRS rule has set the stage for a tumultuous period in the crypto industry, with potential legal battles looming. The incoming administration’s stance towards cryptocurrency could dramatically alter the landscape, positioning the U.S. as a global leader in this innovative and rapidly evolving industry.
