- Patrick McHenry, the head of the U.S. House of Representatives Financial Services Committee, has criticized the proposed cryptocurrency regulations by the U.S. Treasury Department and the Internal Revenue Service (IRS).
- The proposed regulations, which were announced today, aim to tighten the rules for cryptocurrency investors to avoid tax evasion.
- Decentralized finance (DeFi) protocols and non-fungible token (NFT) marketplaces will also be required to comply with these regulations.
Patrick McHenry, a leading figure in the U.S. House of Representatives Financial Services Committee, has voiced his concerns over the proposed cryptocurrency regulations by the U.S. Treasury Department and the IRS. The new regulations, announced today, are designed to prevent tax evasion by cryptocurrency investors. DeFi protocols and NFT marketplaces will also be subject to these new rules.
McHenry Calls for an End to Attacks on the Digital Asset Ecosystem
McHenry has expressed his disapproval of the proposed rules for digital asset reporting, describing them as another front in the Biden administration’s ongoing assault on the digital asset ecosystem. He urges the administration to cease its attempts to stifle the digital asset ecosystem in the U.S. and instead work with Congress to establish clear rules for the sector. McHenry is eagerly anticipating the progress of his bipartisan solution, the Keep Innovation in America Act, which aims to correct these misguided reporting requirements, protect the privacy of market participants, and ensure the growth of the digital asset ecosystem in the U.S.
New Regulations Announced Today
Both the Treasury Department and the IRS announced some new regulations related to cryptocurrency today. Both institutions prefer to define digital asset intermediary companies as “trading platforms, digital asset payment providers, and wallet developers”. However, these new rules have not yet gained official status. If approved by Congress, they will be applicable from 2026 for the 2025 tax year. On the other hand, cryptocurrency miners and stakers are exempted from intermediary regulations.
DeFi Protocols and NFT Marketplaces Must Comply with the Rules
The proposed regulations aim to make it more difficult for cryptocurrency investors to evade paying taxes. Under the proposal, U.S.-based exchanges like Coinbase and Kraken will be required to send annual reports to their customers and the IRS. DeFi protocols and NFT marketplaces will also be required to comply with these rules. As a result, cryptocurrency intermediaries, primarily exchanges, will be subjected to nearly the same rules as intermediary companies selling investment contracts. According to a law passed in Congress, the ministry had to publish new regulations by December 31, 2023. The ministry and the IRS, a body affiliated with it, announced the regulations just four months before the deadline.
Conclusion
In conclusion, the proposed regulations by the U.S. Treasury Department and the IRS have sparked controversy, with critics like Patrick McHenry arguing that they could stifle the growth of the digital asset ecosystem in the U.S. It remains to be seen how these regulations will impact the cryptocurrency market and whether they will be effective in preventing tax evasion.
