The United States Department of the Treasury and the Internal Revenue Service (IRS) have jointly unveiled a comprehensive set of proposals. This is aimed at defining the reporting requirements for brokers in the digital asset space.
Introduction to the Regulatory Proposal
The Office of Advocacy of the U.S. Small Business Administration made this announcement on August 29, shedding light on the key aspects of the proposed regulations. In this proposal, digital asset brokers, which encompass trading platforms, payment processors, and select hosted wallet providers, are referred to as “digital asset middlemen.”
These entities would soon be obligated to report gross proceeds from all sales or exchanges of digital assets. However, this will start as early as January 1, 2025.
Gains and Losses Reporting
Under the proposed regulations, digital asset middlemen will not only be responsible for reporting gross proceeds. Also, it will be for providing detailed information regarding gains and losses incurred during crypto asset sales. However, this specific requirement is slated to take effect on or after January 1, 2026.
Furthermore, one of the primary objectives of these regulations is to boost taxpayer compliance. By requiring digital asset brokers to report transactions, the IRS aims to gain greater transparency into the income earned by taxpayers engaging in cryptocurrency activities.
The Treasury Department and the IRS have taken a proactive approach. This is by inviting feedback from small businesses in the United States. Also, this engagement will culminate in a public hearing scheduled for November 7, 2023. Small businesses will have the opportunity to express how these regulations might impact their operations.
Implementation and Reporting
Notably, once these regulations are officially enacted into law, all brokers in the U.S. will be mandated to file information returns with the IRS. This process will involve the use of the new Form 1099-DA, along with the provision of payee statements to customers.
Congressional Oversight
In a related development, the United States Government Accountability Office, a congressional watchdog agency, recently released a comprehensive 77-page report. This further highlighted the urgent need for more stringent cryptocurrency regulations.
Notably, the report underscored the regulatory gap in the spot markets for non-security crypto assets. Also, it recommended designating a federal regulator to provide comprehensive oversight in this domain. This, it argued, would mitigate financial stability risks and provide users with enhanced protections.
While traditional assets in the same category benefit from robust regulation, the report emphasized the need for a similar level of oversight within the cryptocurrency space.
Read More:
Ripple Labs Chair Criticizes Biden and Gensler for Mishandling Crypto
Chainlink (LINK) Gains Momentum as Whales and Sharks Accumulate Tokens