Blockchain development company Consensys has sent a letter to the U.S. Internal Revenue Service requesting a delay in proposed tax rules that would require brokers and exchanges to report certain sales of cryptocurrency.
“We must reflect our overarching concern that certain aspects of the regulation do not sufficiently take into account the burden on prospective brokers, including firms that currently do not traditionally have reporting obligations.” letter said.
Last April, the IRS released an initial version of Form 1099-DA under tax reporting rules proposed last August that said cryptocurrency brokers would be treated similarly to traditional brokers for products like stocks and bonds. Under the proposed rule, entities defined as brokers would be required to file Form 1099-DA on behalf of their customers for certain cryptocurrency transactions.
In the draft form, the IRS lists broker types as kiosk operators, digital asset payment processors, hosted wallet providers, and non-hosted wallet providers.
MetaMask wallet developer Consensys criticized the draft form for its lack of clear guidance and overly broad broker definitions, potentially leading to multiple parties reporting the same transaction.
“For example, the draft form has not been published with guidance for brokers and presents insurmountable challenges when asked to develop a plan to implement the draft form,” Consensys said in the letter. “Simply put, it is unclear how to report on the various boxes on the draft form.”
Blockchain companies have also raised concerns about the proposed rules’ ability to address data privacy concerns within the cryptocurrency industry. In addition to these concerns, Consensys noted that brokers have limited time to achieve compliance before the upcoming tax filing deadline.
“I cannot emphasize more strongly that providing software developers currently proposed as brokers with forms that require manual entry is single-handedly destructive to American companies publishing blockchain user interfaces such as self-custodial wallets.” added.
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Previously, Ji Kim, chief legal and policy officer at the Crypto Council for Innovation, said it was “unfortunate” that the IRS lists non-hosted wallet providers as brokers on X.
“This fails to recognize, among other things, that wallet providers, as software technology providers, have no knowledge of the nature of the transactions being processed or the identity of the parties involved in the transactions,” Kim said.
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