Blockchain development firm Consensys has sent a letter to the U.S. Internal Revenue Service (IRS) requesting a delay in implementing the proposed tax regulation that would require brokers and exchanges to report certain sales of cryptocurrencies. The company cites a lack of clarity in the regulations and the burden they would place on entities that do not traditionally have reporting obligations.
Concerns Raised by Consensys
- The draft Form 1099-DA, released by the IRS in April, lacks clear instructions and is overly broad in its definition of a broker, potentially leading to multiple parties reporting the same transaction.
- The proposed rules do not sufficiently consider the burden on the would-be brokers, which include entities that do not traditionally have any reporting obligations.
- The limited time frame for compliance before the upcoming tax filing deadline poses a significant challenge for brokers.
- The ability of the proposed regulations to address data privacy issues within the crypto industry is a concern.
Consensys’ Call for Delay
In the letter, Consensys urged the IRS to delay implementing the new crypto reporting rules, stating that “it is unclear how to report in several boxes of the Draft Form.” The company emphasized 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.”
Reactions from the Industry
“This fails to recognize, among other things, that a wallet provider, as a software tech provider, does not have knowledge of the nature of transactions processed, nor the identity of the parties to the transaction,” – Ji Kim, chief legal and policy officer at the Crypto Council for Innovation.
Consensys’ senior counsel, Bill Hughes, encouraged other firms potentially affected by the tax form to comment on the regulation by Friday.
Just now, @Consensys commented on the #IRS's draft Form 1099-DA to provide our perspective that the information required under the proposed regulations and on the Draft Form is overly broad and imposes a costly compliance burden, particularly for a #blockchain software provider.… pic.twitter.com/B36XLhr1Qc
— Bill Hughes : wchughes.eth 🦊 (@BillHughesDC) June 20, 2024
Conclusion
The proposed crypto reporting rules have raised significant concerns within the industry, with Consensys leading the charge in requesting a delay from the IRS. The lack of clarity and the potential burden on entities not traditionally required to report have sparked a call for more consideration and a delay in the implementation of these new regulations.
