Will New Crypto Tax Rules Kill The Industry? Blockchain Association CEO Chimes In

The U.S. Treasury Department has put forth new guidelines suggesting that crypto brokers be treated on par with those handling traditional investments, such as stocks and bonds.

Crypto brokers and exchanges must report specific crypto sales, from Bitcoin BTC/USD to non-fungible tokens (NFTs), the rules say.

This initiative is meant to bridge the existing tax gap and "ensure that everyone plays by the same set of rules."

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Kristin Smith, CEO of the Blockchain Association, highlighted the significance of tax adherence in crypto dealings.

"If done correctly, these rules could help provide everyday crypto users with the necessary information to accurately comply with tax laws," she said.

Yet, there are concerns. After all, crypto — compared to traditional assets — is unique. Smith emphasized the necessity for appropriately tailored regulations.

The Rules

In a joint effort with the Internal Revenue Service, the Treasury rolled out these proposed regulations last Friday in accordance with the Infrastructure Investment and Jobs Act of 2021, which had provisions to enhance the reporting by brokers on their clients' crypto activities.

While taxpayers currently have a tax liability on profits and can claim deductions on losses from digital assets upon their sale, the Treasury pinpointed the challenges they face in determining these profits.

To simplify this, brokers might soon have to issue a Form 1099-DA, guiding taxpayers in their tax obligations.

The Treasury Department clarified: "These regulations align tax reporting on digital assets with tax reporting on other assets, and, as a result, avoid preferential treatment between different types of assets."

Who Will Be Affected?

The definition of brokers would encompass platforms, certain hosted wallets, and payment processors.

IRS and Treasury officers have also incorporated decentralized exchanges, suggesting they would need to gather client data and report sales details.

"The reasons for requiring information reporting on dispositions of digital assets do not depend on the manner by which a business operating a platform affects customers’ transactions," the Treasury stated.

What's Next: If adopted, brokers would start reporting details on digital asset sales and exchanges by 2025.

This move is anticipated to yield around $28 billion over the next decade, as per the Treasury's projections.

Feedback on this proposal is welcomed until Oct. 30, with the Treasury Department planning discussions for November.

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As the digital asset landscape continues to evolve, industry experts and enthusiasts are keenly watching platforms like Benzinga for insights into the future of digital assets and the potential implications of such regulatory shifts.