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New IRS Rules Mandate Reporting For DeFi Brokers: What This Means For Crypto Transactions
In a move that could reshape the operational landscape for decentralized exchanges (DeFi), the Internal Revenue Service (IRS) has introduced new rules mandating reporting for DeFi brokers. The development, which potentially affects 650 to 875 DeFi brokers, signifies a shift toward stricter regulatory oversight in the crypto space.
As outlined by the IRS, these regulations classify DeFi front-ends as brokers, requiring them to report digital asset sales and transactions. This change is expected to have far-reaching implications for the DeFi industry, which has traditionally operated with limited regulatory scrutiny.
The new rules are designed to close tax loopholes highlighted in the 2021 federal infrastructure law. However, they have raised concerns within the DeFi community. Jake Chervinsky, a prominent lawyer supporting cryptocurrency, has expressed significant disagreement with the new regulations.
“It must be struck down, either by the courts or the incoming administration,” Chervinsky emphasized, arguing that Congress did not intend for “broker” to encompass DeFi platforms.
In response to these concerns, the IRS announced that brokers who make a “good-faith effort” to comply with the reporting requirements in 2027 will be granted relief from penalties for failing to report digital asset sales. This provision also extends to backup withholding tax liabilities for transactions in 2028 and certain sales in 2029, offering some leeway as the industry adapts to this new regulatory landscape.
This shift toward stricter oversight could have significant implications for crypto transactions, potentially leading to a more transparent financial ecosystem.
Source: bitcoinist.com
