The Washington DC-based blockchain advocacy group contended that the IRS broker rule provisions violate the Paperwork Reduction Act.
The Blockchain Association, an industry advocacy group based in Washington DC, has once again raised objections to the Internal Revenue Service (IRS)’s proposed broker-dealer rules. This time, their focus is on the undue burden these rules would impose on investors, cryptocurrency companies, and the IRS itself¹. In their letter, the Association cited the Paperwork Reduction Act, which emphasizes that government regulators should not burden individuals and entities in the financial system with unnecessary and obtuse paperwork requirements.
According to the figures outlined in their letter, signing these proposed rules into law would result in 8 billion 1099-DA tax forms that must be processed, 4 billion hours wasted in labor to process the forms, and an annual compliance cost of $254 billion. These hefty costs and labor burdens significantly differ from earlier IRS projections, which estimated that the new regulations would take only 0.15 hours per customer to complete, with a total compliance cost of $136,350,000.
The Blockchain Association also highlighted that imposing annual compliance costs of $245 billion is unreasonable for an asset class and markets that produce, at most, a tax gap of $10 billion. Their objections stem from concerns about government overreach and the difficulties of imposing reporting requirements on decentralized networks and their participants. The crypto community has echoed these concerns, emphasizing the need for more practical and informed regulations in this rapidly evolving space.
The industry advocacy group explained that certain companies inside the blockchain ecosystem, notably decentralized finance protocols, would have a difficult time, at best, complying with these laws, characterizing the Internal Revenue Service’s proposed broker reporting rule as government overreach.
The Blockchain Association’s initial letter of objection
In the end, the letter exposed “fundamental misunderstandings” held by American government officials regarding digital assets, cryptocurrencies, and decentralized finance. These authorities find it difficult to comprehend the paradigm change that blockchain technology brings about.
The Blockchain Association wrote the IRS a 39-page letter in 2023 with a long list of concerns about the agency’s proposed broker regulations.
The industry advocacy group explained that certain companies inside the blockchain ecosystem, notably decentralized finance protocols, would have a difficult time, at best, complying with these laws, characterizing the Internal Revenue Service’s proposed broker reporting rule as government overreach.
In the end, the letter exposed “fundamental misunderstandings” held by American government officials regarding digital assets, cryptocurrencies, and decentralized finance. These authorities find it difficult to comprehend the paradigm change that blockchain technology brings about.
Widely unpopular within the crypto community
The cryptocurrency community has responded negatively to the Internal Revenue Service’s proposed tax regulations and reporting requirements. Numerous people and organizations have expressed their disapproval of the outdated mandates.
Jerry Brito, executive director of Coin Center, echoed the concerns raised in the Blockchain Association’s initial letter by pointing out the practical challenges of putting these reporting obligations on decentralized networks and their users.
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