Prominent pro-XRP advocate and lawyer John Deaton has voiced strong opposition to the Biden administration’s newly finalized crypto tax reporting rules. The regulation, titled “Gross Proceeds Reporting by Brokers that Regularly Provide Services Effectuating Digital Asset Sales,” was recently introduced by the Internal Revenue Service (IRS). Deaton criticized the move as a blow to decentralized finance (DeFi) and the broader crypto industry.
The rule mandates that brokers facilitating digital asset transactions report gross proceeds and provide users with Form 1099, collecting identifying information such as names and addresses. Deaton argues that this places an undue burden on DeFi platforms, which operate through autonomous smart contracts and lack centralized intermediaries capable of fulfilling such requirements.
Deaton’s criticism extends beyond the IRS. He recently took aim at Senator Elizabeth Warren, accusing her of aligning with the banking sector to push anti-crypto policies. According to Deaton, Warren’s stringent regulatory stance is stifling the growth and innovation of the digital asset industry.
DeFi Innovation Under Threat
The new IRS rules impose broker-like responsibilities on front-end service providers offering access to decentralized protocols, though the protocols themselves are excluded from reporting obligations. Deaton contends that this distinction creates operational hurdles for DeFi entities and undermines the decentralized and permissionless nature of blockchain technology.
Drawing parallels to earlier legislative efforts, Deaton likened the rule to Senator Warren’s push for policies he described as a de facto ban on Bitcoin self-custody. He warned that the regulation would drive developers and projects offshore, limiting the United States’ ability to compete in the rapidly evolving digital asset space.
What’s Next for the Industry?
The finalized rule is scheduled to take effect on January 1, 2027, providing a brief window for the industry to adapt. The IRS claims that the rule levels the playing field by aligning DeFi brokers with traditional securities brokers under the same tax reporting obligations. However, Deaton has urged the new Congress to prioritize reversing the regulation, warning of its potential to stifle innovation in the DeFi sector.
The backdrop of these developments includes former President Donald Trump’s pledge to make the U.S. a global crypto hub. However, with 95% of Bitcoin already mined and the looming tax burdens, achieving this vision may prove challenging.
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This clash underscores the ongoing battle between crypto advocates and policymakers over the future of decentralized technologies in the United States.
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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