On June 28, the **United States Internal Revenue Service (IRS)** unveiled the definitive version of its updated regulations for crypto brokerage reporting, delineating the range of entities within the industry that the amendments will impact. The IRS has indicated that the latest reporting directives will not apply to decentralized exchanges and wallets where the owner maintains custody. Following a thorough review of the extensive feedback from industry stakeholders, the IRS has concluded that it requires additional time to fully grasp the intricacies of wholly decentralized platforms.
Furthermore, the IRS has not granted exemptions to stablecoins and tokenized assets representing real-world commodities; these will be subject to the same reporting mandates as other cryptocurrencies.
![First page of the Internal Revenue Service’s final broker rules. Source: IRS]
In response to the regulatory updates, **IRS Commissioner Danny Werfel** emphasized the importance of bridging the tax gap presented by digital currencies and the potential for tax evasion among affluent individuals. This sentiment echoes the views of Werfel’s colleague at the IRS, **Guy Ficco**, head of criminal investigations, who has forecasted a surge in cryptocurrency-related tax evasion in the upcoming 2024 tax period.
The crypto industry’s advocacy organizations, including **The Blockchain Association** and **The Chamber of Digital Commerce**, have voiced significant opposition to the IRS’s proposed brokerage regulations over the previous year. In 2023, The Blockchain Association raised the alarm, challenging the IRS’s suggested reporting requirements due to their inherent conflict with the principles of decentralized financial networks.
More recently, The Blockchain Association has once again expressed its apprehensions regarding the proposed brokerage rules by the agency, highlighting the excessive regulatory pressures and associated compliance expenses that these regulations would impose on market participants, industry enterprises, and the IRS itself. The group contends that these rules infringe upon the Paperwork Reduction Act and could lead to compliance costs amounting to an estimated $256 billion annually.
Following The Blockchain Association’s expression of concern over the regulatory demands of submitting billions of 1099-DA tax forms, The Chamber of Commerce concurred with these grievances, suggesting that the tax compliance documentation could potentially lead to privacy concerns.
**Magazine Sidebar:**
Opinion Piece: The fervor of Republican crypto enthusiasts is nearly as problematic as the Democrats’ staunchly ‘anti-crypto’ faction.