The Blockchain Association (BA), a prominent U.S.-based cryptocurrency advocacy group, has recently submitted a comment letter vehemently opposing the tax regulations proposed by the Internal Revenue Service (IRS).
IRS Proposal and The Blockchain Association’s Stand
The BA’s letter, dated November 13, scrutinizes the IRS rules introduced in August, focusing on the regulation of the sale and exchange of digital assets by brokers. According to the BA, these rules not only exceeded the government’s authority but also showcased “fundamental misunderstandings about the nature of digital assets and decentralized technology.”
Compliance Challenges and Overstepping Authority
The Blockchain Association’s critique centers on the claim that many participants in the crypto space would face significant challenges in complying with the proposed regulations. The group specifically highlights the difficulties for those involved in decentralized finance (DeFi). They further asserted that they are “fundamentally unable to comply.”
Moreover, the BA alleges that these regulations could potentially violate constitutional rights to privacy and freedom of expression. They are also accusing the Treasury of overstepping its authority.
BA CEO’s Perspective: A Call for Understanding
Kristin Smith, the CEO of the Blockchain Association, emphasized the need for the Treasury Department to take additional time. This is to comprehend the potential damage and impracticality of the expanded broker definition, especially in its impact on developers of decentralized technology in the U.S.
Furthermore, she argues that the Treasury’s proposal goes beyond a mere regulatory measure. Also, it constitutes an infringement on the privacy rights of individuals utilizing decentralized technology.
Industry Response and Future Implications
Since the release of the draft in August, various stakeholders, including U.S. lawmakers, industry leaders, and legal experts, have weighed in on the potential consequences of the proposed regulations for the future of crypto taxation in the country. The proposed rules on reporting crypto transactions could come into effect in 2026 for transactions conducted in 2025, according to the current draft.
In October, Paul Grewal, Coinbase chief legal officer expressed concern that these rules could “threaten to harm a nascent industry when it’s just getting started.” Despite the criticism, a group of U.S. senators has supported the measure in its current form. Furthermore, they are advocating for the regulations to be enforced before 2026.