The Blockchain Association has once again expressed its opposition to the Internal Revenue Service’s (IRS) proposed regulations for broker-dealers, citing the burdensome impact it would have on investors, cryptocurrency companies, and the IRS itself. In a letter, the industry advocacy group referred to the Paperwork Reduction Act, which prohibits government regulators from imposing unnecessary and complicated paperwork requirements on individuals and entities involved in the financial system.
Representatives of the Blockchain Association argued that implementing these proposed rules would result in the processing of 8 billion 1099-DA tax forms, wastage of 4 billion hours in labor for form processing, and an annual compliance cost of $254 billion. These figures presented in the letter significantly differ from the earlier projections made by the IRS, which estimated that the new regulations would take 0.15 hours per customer to complete, with a total compliance cost of $136,350,000.
Additionally, the Blockchain Association concluded that imposing an annual compliance cost of $245 billion was completely unreasonable for an asset class and markets that generate, at most, a tax gap of $10 billion.
In 2023, the Blockchain Association submitted a 39-page letter to the IRS outlining a comprehensive list of objections to the proposed broker regulations. The industry advocacy group described the IRS’s proposed broker reporting rule as an overreach by the government, emphasizing that certain entities within the blockchain ecosystem, such as decentralized finance protocols, would face significant challenges in complying with these rules. The letter also highlighted the “fundamental misunderstandings” held by U.S. government officials regarding cryptocurrencies, digital assets, and decentralized finance, as they struggle to comprehend the paradigm shift introduced by blockchain.
The proposed tax rules and reporting criteria from the IRS have faced strong opposition from the crypto community, with many individuals and institutions expressing dissatisfaction with the requirements. Jerry Brito, the executive director at Coin Center, echoed the objections raised in the Blockchain Association’s original letter, pointing out the logistical difficulties of imposing these reporting requirements on decentralized networks and their participants.