IRS Unveils New Tax Reporting Rules for 2027: Impact on Decentralized Finance Industry Under Scrutiny

IRS Tax Reporting Rules Set for 2027 Spark Concerns Over Decentralized Finance

A recent development in the tax reporting rules has sparked concerns over decentralized finance (DeFi) as the Internal Revenue Service (IRS) has released new regulations that require brokers to report profits and customer data starting January 1, 2027. The rule aims to align DeFi brokers with traditional securities reporting standards.

According to John Deaton, an XRP lawyer, these regulations unfairly target DeFi platforms and pose a significant threat to innovation in the sector. In his statement, he emphasized that permissionless smart contracts cannot comply with these requirements as they operate autonomously without centralized control or intermediaries.

The new rule also obliges front-end service providers interacting with users and providing decentralized protocol access to report such data, creating operational challenges for entities facilitating DeFi interactions. Critics argue that this distinction creates significant hurdles for those in the industry.

The criticism from Deaton highlights the potential impact these regulations may have on the growth of DeFi innovation. The XRP lawyer warns that enforcing such obligations on DeFi could lead to projects being driven offshore, away from the United States.

Source: cryptonewsland.com