- The IRS introduced rules aimed at regulating the sale and exchange of digital assets by brokers.
- There has been widespread discussion about the future of crypto taxation in the country.
The Blockchain Association, a U.S.-based cryptocurrency advocacy group, strongly opposed proposed tax regulations by the Internal Revenue Service (IRS) in a comment letter submitted on the 13th of November.
The U.S. Treasury Department had introduced rules aimed at regulating the sale and exchange of digital assets by brokers. However, the Blockchain Association argued that these rules exceeded the IRS’s authority, citing:
“Fundamental misunderstandings about the nature of digital assets and decentralized technology.”
The proposed regulations by the Treasury Department were released in August. They addressed challenges in reporting and paying taxes on cryptocurrency transactions.
The Blockchain Association criticized the proposal. They asserted that many participants in the crypto space, particularly in decentralized finance (DeFi), would face significant difficulties in complying with the regulations.
The group argued that the proposed regulations represented an overreach by the Treasury, potentially violating constitutional rights to privacy and freedom of expression.
Concerns on Decentralized technology and privacy rights cited
Kristin Smith, the CEO of the Blockchain Association, emphasized the need for the Treasury Department to take additional time to comprehend the potential damage and impracticality of the expanded broker definition on developers of decentralized technology in the U.S.
“Not only that, but Treasury’s proposal constitutes an infringement on the privacy rights of individuals using decentralized technology.”
Since the release of the draft regulations in August, there has been widespread discussion among U.S. lawmakers, industry leaders, and legal experts about the potential implications for the future of crypto taxation in the country.
According to the current draft, the proposed rules on reporting crypto transactions could take effect in 2026 for transactions conducted in 2025.
In October, Coinbase’s chief legal officer, Paul Grewal, expressed concerns that the rules could:
“Threaten to harm a nascent industry when it’s just getting started.”
Despite opposition, a group of U.S. senators supported the measure as written, urging the enforcement of the regulations before 2026.
Moreover, recently, Mart Uyeda, a Commissioner at the U.S. Securities and Exchange Commission (SEC), emphasized the importance of clarity and transparency in regulatory enforcement actions.