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Blockchain development firm Consensys has formally requested that the U.S. Internal Revenue Service (IRS) delay the implementation of a <a href="https://thecoinrise.com/irs-prepares-for-surge-in-crypto-tax-crime-cases/" rel="noopener noreferrer nofollow">proposed tax regulation</a> that mandates brokers and exchanges to report certain cryptocurrency sales. In a detailed <a href="https://x.com/BillHughesDC/status/1803868933163770080" rel="noopener noreferrer nofollow">letter</a> to the agency, Consensys raised several concerns about the potential impact of the new regulation on the industry.
<h2 id="span-style-font-weight-400-key-concerns-in-irs-proposal-span">Key Concerns in IRS Proposal</h2>
Consensys, well-known for its development of the MetaMask wallet, emphasized the burdensome nature of the proposed regulations on entities that traditionally do not have reporting obligations. “We must echo our overarching concern … that certain aspects of the regulations do not sufficiently consider the burden on the would-be broker,” the letter stated.
In April, the IRS <a href="https://www.irs.gov/draft-tax-forms" rel="noopener noreferrer nofollow">released</a> an early version of Form 1099-DA, which is part of the tax reporting rules proposed last August. These rules aim to treat crypto brokers similarly to traditional brokers who deal with stocks and bonds. Under the proposed regulations, entities defined as brokers would need to file 1099-DA forms for certain cryptocurrency transactions on behalf of their customers.
<h3 id="span-style-font-weight-400-broad-definition-of-brokers-span">Broad Definition of Brokers</h3>
The draft form lists various types of brokers, including kiosk operators, digital asset payment processors, hosted wallet providers, and unhosted wallet providers. Consensys criticized this broad definition, warning that it could lead to multiple parties reporting the same transaction. The company pointed out that the draft form lacks clear instructions for brokers, making it difficult to develop a plan for implementation.
“For instance, the Draft Form has not been published with instructions for brokers, presenting an insurmountable challenge when asked to create a plan to implement the Draft Form,” Consensys writes in the letter. “Said simply, it is unclear how to report in several boxes of the Draft Form.”
<h3 id="span-style-font-weight-400-data-privacy-issues-in-the-irs-proposal-span">Data Privacy Issues in the IRS Proposal</h3>
In addition to concerns about the definition and instructions, Consensys raised significant issues regarding data privacy. The firm argued that the proposed rules by IRS do not adequately address the complexities of data privacy within the crypto industry.
Furthermore, Consensys highlighted the limited time brokers have to comply with the new regulations before the upcoming tax filing deadline.
“It cannot be more emphatically stated that providing software developers, now proposed to be brokers, with a form that requires manual inputs to complete would single-handedly destroy U.S. companies that publish blockchain user interfaces like self-custody wallets,” the letter warned.
<h2 id="span-style-font-weight-400-community-reacts-span">Community Reacts</h2>
Ji Kim, chief legal and policy officer at the Crypto Council for Innovation, also weighed in on the issue. He <a href="https://x.com/_jikim/status/1781401395633013130" rel="noopener noreferrer nofollow">criticizes</a> the IRS’s inclusion of unhosted wallet providers as brokers, calling it “unfortunate.” In an April X post, Kim pointed out that wallet providers, as software tech providers, do not have knowledge of the nature of transactions processed or the identities of the parties involved.
Bill Hughes, senior counsel at Consensys, took to social media to encourage other firms potentially affected by the tax form to <a href="https://www.federalregister.gov/documents/2024/04/22/2024-08528/proposed-collection-comment-request-for-digital-asset-proceeds-from-broker-transactions" rel="noopener noreferrer nofollow">comment</a> on the regulation by the Friday deadline.
The post <a href="https://thecoinrise.com/consensys-urges-irs-to-delay-new-crypto-tax-reporting-regulations/" rel="noopener noreferrer nofollow">Consensys Urges IRS to Delay New Crypto Tax Reporting Regulations</a> appeared first on <a href="https://thecoinrise.com" rel="noopener noreferrer nofollow">Latest News and Insights on Blockchain, Cryptocurrency, and Investing</a>.

Consensys Urges IRS to Delay New Crypto Tax Reporting Regulations

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