Blockchain development firm Consensys has requested the U.S. Internal Revenue Service (IRS) to delay implementing new digital asset reporting regulations, citing significant compliance burdens and lack of clarity.
This information comes from a recent X post by Bill Hughes, a senior counsel at Consensys.
Hughes claimed that Consensys sent a letter to the IRS criticizing the Draft Form 1099-DA for being overly broad and imposing high compliance costs, particularly on blockchain software providers not traditionally considered brokers.
The IRS released an early draft of Form 1099-DA in April 2024, following a proposal from August 2023. These rules aim to treat crypto brokers similarly to traditional stock and bond brokers, requiring various entities to file forms for certain crypto transactions.
The blockchain firm expressed concern that the regulations do not sufficiently consider the burden on potential brokers.
“We must echo our overarching concern that certain aspects of the regulations do not sufficiently consider the burden on the would-be broker,”
Consensys stated.
Consensys also argued that the draft form lacks detailed instructions, making it challenging for entities to plan and implement required reporting procedures. It warned that the current form, requiring manual data input, could severely impact U.S. companies developing blockchain user interfaces, such as self-custody wallets.
The firm also raised concerns about data privacy in the crypto industry and the limited timeframe for brokers to comply with the new requirements before the upcoming tax deadline.
This sentiment was previously echoed by Ji Kim, chief legal and policy officer at the Crypto Council for Innovation, who also criticized the IRS for categorizing non-hosted wallet providers as brokers, pointing out that these providers lack knowledge of transaction details and the identities of involved parties.
In his post, Hughes urged other potentially affected firms to submit their comments on the regulation before the end of today, Friday June 21, 2024.
Notably, this request follows Consensys’ recent celebration of the U.S. Securities and Exchange Commission (SEC) closing its investigation into Ethereum 2.0 without pursuing charges related to ETH sales. While this outcome marks a positive development for Ethereum, the blockchain firm is now seeking a declaration from the SEC that offering user interface software such as MetaMask Swaps and Staking does not violate securities laws.
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