- The Blockchain Association strongly opposes the IRS’s proposed broker rule, citing severe financial implications.
- IRS’s estimates reveal the compliance cost might surpass $254 billion, aiming to bridge a $10 billion tax gap.
- The association points out that Form 1099-DA would bring unhosted crypto wallets under scrutiny to ensure regulatory oversight.
This crypto news article discusses the Blockchain Association’s critique of the IRS’s broker rule, underlying financial implications, and projected compliance burdens.
Blockchain Association Highlights Significant Compliance Burden
In their recent commentary under the Paperwork Reduction Act (PRA), the Blockchain Association contends that the IRS’s proposed broker rule is excessively burdensome. Official estimates suggest the rule will require the submission of over 8 billion forms, which contradicts the aims of the PRA.
Impact on Brokers and Regulatory Compliance
Marisa Tashman Coppel from the Blockchain Association emphasized that the PRA mandates minimizing public burdens, which the proposed IRS rule fails to address. The extensive compliance requirements are poised to affect brokers substantially, deviating from the PRA’s intended purpose of reducing regulatory pressure.
Financial Implications of the Proposed Rule
The IRS has projected compliance costs at $63.53 per hour, estimating a total expense exceeding $254 billion for the required 4 billion hours. This figure starkly contrasts with the anticipated $10 billion tax gap, illustrating a significant mismatch in cost versus potential revenue.
Concern Over Form 1099-DA
Form 1099-DA is designed to capture cryptocurrency transactions involving unhosted wallets under regulatory purview. However, critics argue that the estimated compliance time is significantly understated, resulting in a minimized portrayal of actual costs to brokers.
The Blockchain Association reveals that the IRS’s calculation of 30 minutes per form falls short of realistic expectations, demonstrating an underestimation of the operational and financial strain placed on brokers by the rule.
Expert Opinions on the IRS’s Approach
Chief Legal Officer of Variant Fund, Jake Chervinsky, suggested potential legal actions against the IRS due to their surveillance methods and misunderstanding of P2P transaction technology. He criticizes the IRS’s failure to recognize modern blockchain capabilities, emphasizing a need for regulatory approaches that acknowledge technological advancements.
Support for Regulatory Oversight
Perianne Boring, CEO of the Chamber of Digital Commerce, supports the IRS’s initiative, explaining that extending regulatory frameworks to unhosted wallets aligns with the broader goal of enhancing compliance within the cryptocurrency sector. She underlines the IRS’s focus on KYC (Know Your Customer) conformity for crypto exchanges and brokers, reflecting ongoing efforts to regulate the crypto market effectively.
Conclusion
The proposed IRS broker rule and Form 1099-DA present a profound compliance challenge for the cryptocurrency industry. While aimed at closing a $10 billion tax gap, the estimated $254 billion compliance cost demonstrates a significant imbalance. The Blockchain Association’s critique highlights the importance of pragmatic regulatory policies that recognize the cryptocurrency sector’s unique attributes and operational realities.
