The new tax law passed in the U.S. mandates DeFi brokers to collect detailed user transaction data. This initiative aims to combat tax evasion and align reporting standards for digital assets with those of traditional finance.
Tax Regulation for DeFi
Starting in 2027, brokers in the decentralized finance sector are required to gather detailed user information, such as names, addresses, and trading activities. This development is part of the 2021 Infrastructure Investment and Jobs Act, intended to establish parity between digital assets and traditional tax reporting standards.
Industry Leaders' Opinions
The new law is facing strong opposition from crypto industry leaders and legal experts. Uniswap’s Chief Legal Officer Katherine Minarik and CEO Hayden Adams have been vocal critics of the IRS’s strategy. Adams hopes for the rule's repeal via the Congressional Review Act, emphasizing the impracticality of applying traditional broker standards to decentralized ecosystems.
Impact on the DeFi Market
For crypto investors, the IRS’s new rule might promise increased transparency and the standardization of tax reporting. However, many see these mandates as a threat to the ethos of financial freedom inherent in crypto. DeFi platforms, typically operating without central entities, may face high compliance costs. Smaller platforms, running on lean margins, may struggle to meet the IRS’s demands and may seek more conducive jurisdictions or close operations altogether.
The changes could also introduce volatility into the market as the DeFi space adjusts to stricter regulations. Investors might experience temporary disruptions as platforms implement new systems to comply with the rules or explore avoidance strategies.
