IRS Holds Hearing on Digital Asset Reporting Regulations Following Pushback
Following massive pushback from the crypto industry, the Internal Revenue Service (IRS) held a public hearing on Monday morning, chiefly discussing their recently proposed digital asset broker reporting regulations.
Initially filed on August 29th, 2023, the IRS’ proposed regulations have been at the epicenter of controversy, with nearly 125,000 comments listed on the document as of Monday, November 13th.
Proponents believe the regulatory framework would open the door to accurate accounting and taxation of cryptocurrencies. However, critics argue the proposed regulations would negatively impact the cryptocurrency sector as a whole by threatening consumer privacy and ultimately extending government overreach.
The proposed regulation has been criticized for its use of the term broker, which includes “a dealer, a barter exchange, and any other person who (for a consideration) regularly acts as a middleman with respect to property or services.” Critics argue that the definition is too vague given the wide variety of entities that could be classified under the same umbrella.
“The Proposed Regulations interpret the term “broker” to include “digital asset middleman,” a vague and expansive category of market participants that bears little resemblance to the persons historically considered brokers,” a comment reads in part from the DeFi Education Fund.
“The IRS is so fixated on retrieving customers’ personally identifiable information (PII) and ensuring taxes are properly reported that is ignoring the costs of over-reporting,” states a comment from American for Tax Reform. “This goes beyond what is required of traditional brokers.”
Moreover, players in the crypto space argue that an intermediary is antithetical to the value of DeFi
