The crypto community has voiced its dissatisfaction with the proposed crypto tax reporting regulations put forth by the Biden administration. These rules, designed to detect tax evasion and simplify filing processes, may adversely affect the digital asset industry within the United States.
On August 25th, the Internal Revenue Service (IRS) released a proposal outlining requirements for crypto brokers such as exchanges, payment processors, and wallets to report information on users’ sales and exchanges of digital assets to both the IRS and the individuals themselves.
Additionally, these rules would extend reporting obligations for digital assets to include cash transactions exceeding $10,000. To facilitate tax assessment and avoid complex calculations of gains, the U.S. Department of Treasury intends to introduce a new tax reporting form called Form 1099-DA.
The strict rules come from the $1 trillion 2021 Infrastructure Investment and Jobs Act. The government thinks they’ll make about $28 billion in 10 years by making crypto brokers report taxes more. Brokers might have to follow these rules starting in 2025, for taxes in 2026.
Crypto Industry Fears Losing Competitiveness
Messari CEO Ryan Selkis expressed criticism towards the news, stating that if Biden is reelected, the digital asset industry will struggle to thrive in the United States. He believes that there is a limited future for digital assets within the country under Biden’s leadership.
Chris Perkins, the president of CoinFund, a digital assets venture firm, shares a similar perspective. According to him, other countries have surpassed the U.S. in innovation due to strict regulations. Rather than implementing harsh crackdowns, he advocates for simple and comprehensive rules that promote safe innovation within the Decentralized industry.
Kristin Smith, the CEO of the Blockchain Association, expressed concerns about combining digital asset reporting with traditional assets. She believed that merging these two forms of assets may present challenges and potential risks:
It’s important to remember that the crypto ecosystem is very different from that of traditional assets, so the rules must be tailored accordingly and not capture ecosystem participants that don’t have a pathway to compliance.
Several Democratic senators, including Elizabeth Warren, are urging the Treasury to swiftly implement the rules. They argue that failure to do so will enable tax evaders to continue exploiting the system. The Treasury Department and the IRS are accepting feedback on the proposal until October 30th.
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