IRS 'Raided' by Crypto Investors as Industry Puts Up Fight Against U.S. Tax Proposal

The US Internal Revenue Service (IRS) is now gathering the last words from a crypto industry that disputes the agency’s view proposal for a tax system for digital assets is an existential threat to investor privacy and to decentralized crypto projects.

After a comment deadline and a public hearing on Monday, the Treasury Department’s tax division will have to sift through a mountain of more than 120,000 comments — in some cases aided by artificial intelligence wording tied to campaigns like the The LeCpunK army’s ‘treasury attack’.

Monday’s hearing — limited to audio — will bring together prominent cryptocurrency advocates to lay out their arguments on this proposal, which maps out how crypto brokers and investors would report transactions to the IRS.

Read more: Crypto Tax Basics: A 101 for Beginners

The new tax system — which won’t become final until IRS officials weigh inputs, rewrite a final version and approve it — has drawn industry anger aimed in part at how the proposal would define a “broker” that must comply with this.

“The category of digital asset intermediaries extends beyond the legislative breaking point, in direct conflict with the relevant legislative history,” the DeFi Education Fund argued in a comment letter. The current language of the proposal “leads inexorably to the conclusion that the proposed regulations could treat any participant in the blockchain technology stack as a broker.”

By deliberately enabling a number of decentralized finance (DeFi) platforms, decentralized autonomous organizations (DAOs), wallet providers, and certain payment processors, the IRS may be seeking to demand tax information from organizations that would have difficulty providing it.

A comment from Americans for Tax Reform says the government’s options for real estate agents seeks “a broad definition that includes entities that are unable to report applicable transaction information.” The group argued that “the IRS wants to bring DeFi into the reporting regime to ensure that other entities do not convert to DeFi entities and circumvent reporting requirements.”

Another common industry concern has been investor privacy when it comes to government reporting of transactions, which crypto broker Coinbase (COIN) argued would “impose a liability.” unprecedented, unmonitored and unlimited tracking about Americans’ daily lives,” according to a comment letter from Lawrence Zlatkin, the company’s vice president for tax. He asserted that the regulations as written would “enable government oversight of the choices Americans make about their most private health care decisions, or even when they buy a cup of coffee.”

Despite the objections, there is generally an upside to a crypto tax approach in the US. Establishing rules and forms for how investors report their gains would remove one of the central barriers to broader interest in cryptocurrencies: uncertainty about how to find out what you owe. in taxes. The proposal would implement a customized tax form, similar to the 1099s that investors in the stock market face.

If an IRS rule were passed before any of the U.S. Securities and Exchange Commission’s (SEC) crypto proposals, it would clear the first major hurdle in U.S. crypto regulation: establishing an official status for digital assets in the US financial sector, even as Congress continues. to stumble in her debate about future laws on the crypto markets.

Federal agencies are forced to review all comments in the process of crafting a new rule, and the incredible size of this proposal could require more time than usual to complete that task. Tens of thousands of people filed objections.

Other complaints about the proposal focused on the inclusion of stablecoins as reportable assets and their relationship to defining securities.

To prevent this rule from reinforcing the argument that digital assets are securities, Nicolas Morgan, president of the Investor Choice Advocates Network, has asked the Treasury Department to make it clear that this rule does not apply to securities law.

Read more: How the crypto industry responded to the IRS’s proposed brokerage rule

The US Internal Revenue Service (IRS) is now gathering the last words from a crypto industry that disputes the agency’s view proposal for a tax system for digital assets is an existential threat to investor privacy and to decentralized crypto projects.

After a comment deadline and a public hearing on Monday, the Treasury Department’s tax division will have to sift through a mountain of more than 120,000 comments — in some cases aided by artificial intelligence wording tied to campaigns like the The LeCpunK army’s ‘treasury attack’.

Monday’s hearing — limited to audio — will bring together prominent cryptocurrency advocates to lay out their arguments on this proposal, which maps out how crypto brokers and investors would report transactions to the IRS.

Read more: Crypto Tax Basics: A 101 for Beginners

The new tax system — which won’t become final until IRS officials weigh inputs, rewrite a final version and approve it — has drawn industry anger aimed in part at how the proposal would define a “broker” that must comply with this.

“The category of digital asset intermediaries extends beyond the legislative breaking point, in direct conflict with the relevant legislative history,” the DeFi Education Fund argued in a comment letter. The current language of the proposal “leads inexorably to the conclusion that the proposed regulations could treat any participant in the blockchain technology stack as a broker.”

By deliberately enabling a number of decentralized finance (DeFi) platforms, decentralized autonomous organizations (DAOs), wallet providers, and certain payment processors, the IRS may be seeking to demand tax information from organizations that would have difficulty providing it.

A comment from Americans for Tax Reform says the government’s options for real estate agents seeks “a broad definition that includes entities that are unable to report applicable transaction information.” The group argued that “the IRS wants to bring DeFi into the reporting regime to ensure that other entities do not convert to DeFi entities and circumvent reporting requirements.”

Another common industry concern has been investor privacy when it comes to government reporting of transactions, which crypto broker Coinbase (COIN) argued would “impose a liability.” unprecedented, unmonitored and unlimited tracking about Americans’ daily lives,” according to a comment letter from Lawrence Zlatkin, the company’s vice president for tax. He asserted that the regulations as written would “enable government oversight of the choices Americans make about their most private health care decisions, or even when they buy a cup of coffee.”

Despite the objections, there is generally an upside to a crypto tax approach in the US. Establishing rules and forms for how investors report their gains would remove one of the central barriers to broader interest in cryptocurrencies: uncertainty about how to find out what you owe. in taxes. The proposal would implement a customized tax form, similar to the 1099s that investors in the stock market face.

If an IRS rule were passed before any of the U.S. Securities and Exchange Commission’s (SEC) crypto proposals, it would clear the first major hurdle in U.S. crypto regulation: establishing an official status for digital assets in the US financial sector, even as Congress continues. to stumble in her debate about future laws on the crypto markets.

Federal agencies are forced to review all comments in the process of crafting a new rule, and the incredible size of this proposal could require more time than usual to complete that task. Tens of thousands of people filed objections.

Other complaints about the proposal focused on the inclusion of stablecoins as reportable assets and their relationship to defining securities.

To prevent this rule from reinforcing the argument that digital assets are securities, Nicolas Morgan, president of the Investor Choice Advocates Network, has asked the Treasury Department to make it clear that this rule does not apply to securities law.

Read more: How the crypto industry responded to the IRS’s proposed brokerage rule