Treasury and IRS Finalize Broker Rule, Defer DeFi Decision

Treasury and IRS Finalize Broker Rule, Defer DeFi Decision

The Internal Revenue Service (IRS) and the U.S. Department of Treasury have announced new tax regulations for cryptocurrency brokers. These regulations impose transaction reporting beginning in 2025. However, because the IRS is still examining the 44,000 public comments, decisions on DeFi activities and unhosted wallet providers have been delayed by this new regime.

The IRS’s New Broker Reporting Requirements

Cryptocurrency brokers, including trading platforms, hosted wallet services, and digital asset kiosks, must disclose information about customers’ asset movements and gains in accordance with the new IRS regulations.

Related articles

These regulations, which go into effect on January 1, 2025, aim to combine cryptocurrency brokers with traditional investment firms so that, beginning in 2026, they can file 1099 forms and cost basis data.

A saving grace amongst all the crypto regulatory news today : at least we won’t have to write a response to the final rulemaking on the IRS broker rule and non-custodial entities over the 4th of July week:

— Peter Van Valkenburgh (@valkenburgh) June 28, 2024

The IRS has also clarified that while high-value non-fungible tokens (NFTs) and stablecoin transactions would be subject to the new regulations, regular stablecoin sales under $10,000 and NFT earnings under $600 annually do not require reporting. This law aims to improve tax compliance and reduce tax evasion in the high-risk domain of digital assets.

Decisions on DeFi and Unhosted Wallets Postponed

The new regulation provides clear guidelines for large centralized exchanges like Coinbase and Kraken, but it defers judgments about DeFi operations and unhosted wallet providers until later.

The IRS further stated that further investigation is needed but that non-custodial industry players would not be prohibited from being treated as brokers. These entities’ final rules are anticipated to be announced later in the year.

The IRS emphasized the challenges of overseeing non-custodial businesses, pointing out that these entities could not have the required consumer data and transparency standards. While additional time is needed to formulate appropriate regulations, this decision offers some relief to the unhosted wallet providers and the DeFi sector.

IRS Regulations Governing NFTs and Stablecoins

According to the IRS, most regular stablecoin transactions won’t need to be recorded; however, there will be some exceptions for big purchases and those that bring in more than $10,000 annually.

To alleviate regular cryptocurrency users and assist the IRS in tracking whale activity, stablecoin transactions will be logged collectively rather than individually.

Taxpayers who have sold non-fungible tokens (NFTs) for at least $600 a year must file and disclose their revenue. The IRS will need the number of NFTs sold, the taxpayer identification number, and the profit margin on these reports. To make sure that NFT reporting sufficiently aids in the enforcement of tax rules, the agency will supervise its reporting.

Industry Fears and the Cost of Compliance

The tax legislation was introduced in a contentious manner, facing strong opposition from the bitcoin sector. Concerns have been expressed over the U.S. government’s possible overreach and the onerous regulations placed on organizations that don’t usually serve as brokers, including software developers and miners.

The Digital Chamber and the Blockchain Association noted the extensive scope of information sought, and the Digital Chamber and the Blockchain association noted the significant compliance burden. They contend that the proposed rule may force brokers to submit billions of documents, putting them under a heavy financial and time burden. According to estimates from the IRS, the new regulation will impact 5,000 businesses and roughly 15 million individuals.

The IRS responded that its goal is to strike a compromise between the industry’s ability to comply and the requirement for thorough reporting. The agency also mentioned possibly modifying the tax laws resulting from future stablecoin legislation.

Sign Up for Our Newsletter!

For updates and exclusive offers enter your email.

Sign Up for Our Newsletter!


Next Steps: Sync an Email Add-On

To get the most out of your form, we suggest that you sync this form with an email add-on. To learn more about your email add-on options, visit the following page ( Important: Delete this tip before you publish the form.

Related Posts