U.S. Treasurys Crypto Tax Proposal Faces Criticism from Industry

Crypto Industry Criticizes U.S. Proposal for Taxing Crypto Gains

The U.S. Treasury Department’s new proposal for taxing crypto gains has received immediate criticism from the crypto industry. The proposal’s tax-reporting demands are seen as capturing decentralized crypto operations that are difficult to bring into compliance. CEO of a decentralized finance (DeFi) lobbying group, Miller Whitehouse-Levine, argues that the proposal is “overbroad” and captures entities such as self-hosted wallets. Others point out that wallet providers, decentralized exchanges, and smart contracts with multisignature security setups may also be affected. However, the proposal could potentially help everyday crypto users comply with tax laws.

Key Points:

The U.S. Treasury Department’s proposal for taxing crypto gains has faced criticism from the crypto industry.
The proposal’s tax-reporting demands may capture decentralized crypto operations that are difficult to comply with.
Self-hosted wallets, wallet providers, decentralized exchanges, and smart contracts may be affected by the reporting requirements.
Critics argue that the rules should be tailored to the unique characteristics of the crypto ecosystem.
The proposal could potentially provide everyday crypto users with the necessary information to comply with tax laws.

The crypto industry has until October 30 to voice their objections to the Treasury and Internal Revenue Service, with public hearings scheduled for November 7 and 8. One positive aspect of the proposal is that it generally excludes crypto mining operations, which had been a concern under the 2021 infrastructure law.

Hot Take:

The U.S. Treasury Department’s proposal for taxing crypto gains has sparked immediate criticism from the crypto industry. While the proposal may help everyday crypto users comply with tax laws, it risks capturing decentralized operations and entities that are not easily brought into compliance. The industry now has the opportunity to voice their concerns and propose alternative ideas to the Treasury and IRS. It remains to be seen how the final tax rules for digital assets will balance the need for compliance with the unique characteristics of the crypto ecosystem.