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IRS Tax Reporting Rules Set for 2027 Spark Concerns Over Decentralized Finance
The Internal Revenue Service (IRS) has announced new tax reporting rules effective January 1, 2027. These regulations have sparked concerns among decentralized finance (DeFi) advocates over the potential impact on the industry.
As reported by Crypto News Land, the IRS requires brokers to report crypto profits and customer data, including names and addresses, through Form 1099. The move aims to align DeFi brokers with securities reporting standards.
However, XRP lawyer John Deaton has raised concerns that the new rule could stifle innovation in the decentralized finance sector. He emphasized that permissionless smart contracts cannot comply with these requirements due to their autonomous nature without centralized control or intermediaries.
Deaton’s warning centers on the potential for these regulations to drive projects offshore, away from the United States. His stance echoes previous criticism of Senator Elizabeth Warren’s efforts to restrict self-custody for Bitcoin users.
According to Deaton, this new regulation will create significant operational challenges for entities facilitating DeFi interactions. Furthermore, he believes that it goes against the core principles of decentralized finance, emphasizing decentralization and user privacy.
As the new rules take effect in 2027, many are left wondering about their potential implications on the digital asset industry as a whole.
Source: cryptonewsland.com
