- Decentralized exchanges and self-custody wallets are exempt from reporting requirements.
- Stablecoins and tokenized real-world assets will be subject to new reporting obligations.
On June 28, the US Internal Revenue Service (IRS) updated the industry’s understanding of who will be impacted by new reporting requirements for crypto brokers and released the final version of those rules.
Moreover, decentralized exchanges and self-custody wallets are exempt from the new reporting requirements set forth by the IRS. Also, after reviewing the many responses from the sector, the IRS decided it required “more time to consider the nuances” of fully decentralized networks, as stated in the most recent update.
And just like any other digital asset, stablecoins and tokenized real-world assets will be subject to the government agency’s new reporting obligations. Danny Werfel, commissioner of the Internal Revenue Service, made a comment after the rule modifications about the need to address the tax gap caused by digital assets and possible non-compliance from high-net-worth persons.
Unnecessary Burden
This reasoning was previously advanced by Guy Ficco, head of criminal investigations at the IRS and a colleague of Werfel’s, when he forecasted an increase in cryptocurrency tax evasion in the 2024 tax year.
The Blockchain Association and the Chamber of Digital Commerce are just two of the industry advocacy organizations that have been vocally opposed to the IRS’s proposed broker regulations over the last year.
Furthermore, outraged by what it saw as a fundamental conflict between the IRS’s planned broker reporting requirements and decentralized finance networks, The Blockchain Association raised concerns and objected to the regulations in 2023. The Blockchain Association has just restated its opposition to the IRS’s proposed broker requirements, arguing that they will impose unnecessary burden on businesses in the sector, market players, and the IRS.
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