The Blockchain Association is once again opposing the Internal Revenue Service’s (IRS) proposed broker-dealer rules, highlighting the excessive burden these rules would impose on investors, cryptocurrency companies, and the IRS itself.
In a letter, the advocacy group referenced the Paperwork Reduction Act, which mandates that government regulators should not impose unnecessary and complex paperwork requirements on those in the financial system.
The Blockchain Association’s spokespeople argued that implementing these proposed rules would result in 8 billion 1099-DA tax forms needing processing, wasting 4 billion hours of labor, and incurring an annual compliance cost of $254 billion.
The letter presented figures showing that these compliance costs and labor burdens starkly contrast with earlier IRS estimates, it was reported.
The IRS had projected the new regulations would require 0.15 hours per customer to complete, totaling a compliance cost of $136,350,000.
Furthermore, the Blockchain Association argued that annual compliance costs of $245 billion were entirely unreasonable for an asset class and markets that generate a tax gap of at most $10 billion.
In 2023, the Blockchain Association sent a 39-page letter to the IRS, detailing their comprehensive objections to the proposed broker regulations.
The advocacy group described the IRS’s proposed broker reporting rule as government overreach, noting that certain entities within the blockchain ecosystem, such as decentralized finance protocols, would struggle to comply with these rules.
The letter emphasized “fundamental misunderstandings” about cryptocurrencies, digital assets, and decentralized finance among U.S. government officials, who find it challenging to grasp the paradigm shift introduced by blockchain technology.
The proposed tax rules and reporting criteria from the IRS have sparked a significant backlash from the crypto community.
Many individuals and institutions have expressed their disapproval of the requirements, deeming them out-of-touch.
Jerry Brito, executive director at Coin Center, echoed the objections raised in the Blockchain Association’s letter.
He pointed out the logistical difficulties of imposing these reporting requirements on decentralized networks and their participants, further underscoring the impracticality of the proposed rules.
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