The controversial new rules could burden front-end DeFi operators, but could also simplify individual tax returns.
The US Treasury and the IRS finalized the rules on December 27 That will require decentralized finance (DeFi) services to report new data related to crypto activity.
DeFi brokers, defined by the Treasury as front-end service providers that interact directly with customers in digital asset transactions, will be required to report gross proceeds from the sale of their digital assets via Form 1099.
The same requirements already apply to securities brokerages and cryptocurrency trading custody platforms. According to the Treasury, digital protocol operators and protocol software developers are not considered intermediaries under the rules.
However, the requirements apply to a wide variety of platform operators: Forbes He explained that several front-end DeFi operators will need to comply, including operators of certain websites, browser extensions, and non-hosted wallets.
In addition to reporting revenue from transactions that took place after January 1, 2027, Forbes noted that DeFi operators must track transactions and collect information about user identities through Know Your Customer (KYC) measures. .
The new rules do not add reporting requirements for individuals, who are already required to report their crypto earnings. However, DeFi users should eventually receive Form 1099, which clarifies what they must report on their tax return.
The Blockchain Association and other industry groups have filed a joint lawsuit that aims to show that the rules are illegal and unconstitutional.
The lawsuit argues that the rules include DeFi entities that do not conduct crypto transactions but instead allow users to transact with each other.
That lack of participation makes it impossible for DeFi entities to comply with the rules in their current form, according to the lawsuit. Any attempt to comply would involve the introduction of intermediaries, undermining the framework of direct-to-user DeFi without intermediaries. Furthermore, attempting to comply would be cost-prohibitive and would cause many entities to close or move to another country.
in a related statementThe Blockchain Association mentioned that the requirements could affect end users, warning that the rules are an “infringement on the privacy rights of people who use decentralized technology.”
On the other hand, Bill Hughes, senior lawyer at Consensys, argument that the rules could apply beyond the most popular cryptocurrencies. He stated that the rules apply to “all assets,” including non-fungible tokens (NFTs) and stablecoins, which are “all costs and no benefits” in terms of revenue.
Meanwhile, Republican Senator Cynthia Lummis, implicit that the transition to the Trump administration on January 20 could cause the rule to be scrapped. However, Trump’s team had apparently not commented on the matter as of late December.
Disclaimer: The information contained herein is provided without regard to your personal circumstances and should not therefore be construed as financial advice, an investment recommendation or an offer or solicitation to trade in cryptocurrency.
