The Growing Resistance to Crypto Tax Proposals
The cryptocurrency industry is pushing back against new regulatory proposals that would expand the requirements for disclosing specific digital currency transactions.
Back in August, the US Treasury Department posted a draft of these proposed guidelines. The goal of these guidelines is to address challenges related to reporting and taxing cryptocurrency transactions.
Now, critics are concerned that these measures will create significant obstacles for the broader crypto market and decentralized finance, which could potentially raise constitutional issues.
The Blockchain Association: Opposing Tax Proposals
The Blockchain Association, a US-based cryptocurrency advocacy group, has submitted a comment letter largely opposing the tax laws recommended by the Internal Revenue Service (IRS).
Some of the 124,000 letters submitted argue that the proposed rules extend the definition of a broker too far, particularly impacting participants in decentralized finance (DeFi).
The association argued that implementing these guidelines would create significant challenges for many within the cryptocurrency sphere. Specifically, they believe DeFi participants would struggle to comply with these regulations.
They also raised concerns about constitutional rights violations and emphasized that developers of DeFi protocols and non-custodial wallets would face inherent challenges in adhering to these rules.
Crypto Ecosystem Unique Nature
Kristin Smith, CEO of the Blockchain Association, highlighted the unique nature of the crypto ecosystem compared to traditional assets. She stressed the need for tailored rules to suit this environment without inadvertently encompassing participants who have no clear path to compliance.
DeFi Education Fund CEO Miller Whitehouse-Levine also criticized the current proposal as perplexing and contradictory, seeking to enforce regulatory frameworks based on intermediaries’ presence in situations where they are absent.
Hot Take: Impact on Decentralized Projects
If these regulations are enforced, it could force US-based decentralized projects to relocate internationally or cease operations altogether. Compliance would require abandoning the very technology that defines their uniqueness. These regulations could have serious implications for both individuals and businesses within the crypto space.
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