The IRS's new policy requires DeFi brokers to adhere to traditional securities rules, sparking disputes with crypto industry representatives.
Background of Updated Rules
Updated rules released by the IRS on December 27 direct certain "DeFi brokers" to function like traditional finance institutions by collecting user activity data and reporting on crypto proceeds. These regulations affect "front-end" DeFi operators managing websites for accessing web3 platforms like decentralized exchanges.
Crypto Industry's Reaction
The crypto industry has disagreed with digital assets being subjected to existing securities laws. The IRS and the Treasury Department jointly opposed this view. Industry representatives argue that most DeFi protocols find it challenging to comply with securities laws, risking user privacy. Digital asset advocacy groups, like The Blockchain Association, promised "aggressive action" against IRS policies, suggesting congressional lobbying and perhaps litigation.
Future of Disputes and Actions
Without active opposition, the latest rules are set to be enacted by January 1, 2027. Industry participants have previously fought against the agency’s initial tax proposal. Consensys Attorney Bill Hughes predicts continued resistance, stating, “The outgoing administration isn’t leaving quietly. The fight continues.”
The IRS's new guidelines for DeFi brokers are causing significant concern within the crypto industry. The push for more suitable regulation continues.
