IRS Issues New Guidelines on Reporting Requirements for Decentralized Finance Transactions

New IRS Rules Mandate Reporting For DeFi Brokers: What This Means For Crypto Transactions

In a significant move for the cryptocurrency landscape, the United States Internal Revenue Service (IRS) has recently issued regulations mandating reporting requirements for decentralized finance (DeFi) brokers. The new rules have stirred concerns within the DeFi community, with some experts warning of potential long-term consequences for crypto transactions.

According to sources, the IRS has clarified that any entity providing a service that facilitates digital asset transfers will be classified as a broker and is therefore subject to these reporting requirements. This move has sparked debate on whether or not this classification goes beyond the agency’s statutory authority, violating constitutional principles in the process.

Jake Chervinsky, a prominent lawyer supporting cryptocurrency, has expressed strong disagreement with the new regulations. He asserts that the IRS has exceeded its authority by imposing such stringent measures on DeFi platforms. Chervinsky believes that Congress did not intend for “broker” to encompass DeFi providers.

The regulations are expected to affect an estimated 650 to 875 DeFi brokers, significantly reshaping the operational landscape for decentralized exchanges.

In a surprising move, the IRS has announced relief from penalties for failing to report digital asset sales in 2027. This provision extends to backup withholding tax liabilities for transactions in 2028 and certain sales in the following year, providing a temporary reprieve as the industry adjusts to these stricter regulatory oversight measures.

It is crucial for DeFi users and investors to be aware of these changes and understand their implications for crypto transactions.

As always, we will continue to monitor the situation closely and provide updates on any further developments.

Source: bitcoinist.com