Consensys, a leading blockchain development firm, has urged the U.S. Internal Revenue Service (IRS) to postpone the implementation of new crypto tax reporting regulations. The request comes in response to the IRS releasing a draft version of Form 1099-DA in April, which would require brokers and exchanges to report certain cryptocurrency sales by their customers.
Concerns Over Broad Definitions and Implementation Challenges
Consensys argues that the proposed regulations place an undue burden on entities classified as brokers, including those not traditionally subject to such reporting requirements. The firm points to the draft form’s lack of clear instructions and overly broad definition of a “broker,” potentially leading to duplicate reporting for the same transaction.
“The Draft Form has not been published with instructions for brokers, presenting an insurmountable challenge,” Consensys stated in their letter to the IRS. “Said simply, it is unclear how to report in several boxes of the Draft Form.”
Data Privacy and Limited Compliance Time Raise Red Flags
The blockchain firm further expressed concerns about the regulations’ potential impact on data privacy within the crypto industry. Additionally, Consensys highlighted the limited timeframe brokers would have to comply before the upcoming tax filing deadline.
The letter emphasizes the detrimental effect these regulations could have on U.S. software developers creating self-custody wallets. “Providing software developers, now proposed to be brokers, with a form that requires manual inputs would single-handedly destroy U.S. companies…”
Industry Voices Echo Concerns
Consensys’ concerns resonate within the crypto industry. Ji Kim, from the Crypto Council for Innovation, criticized the IRS’ inclusion of unhosted wallet providers as brokers. He argued that such providers lack the necessary information to effectively report on transactions.
Also Read: Consensys Sues SEC in Landmark Case Over Ethereum Classification and Crypto Regulation
Call to Action for Industry Collaboration
Bill Hughes, senior counsel at Consensys, encouraged other affected firms to submit comments on the regulations before the deadline. This collaborative effort could lead to a more workable and efficient crypto tax reporting system.
The debate surrounding crypto tax reporting highlights the need for clearer regulations that balance tax collection with fostering innovation within the burgeoning blockchain industry.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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