Blockchain Association Pushes Back Against IRS Regulations on Crypto Brokers

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The Blockchain Association, a prominent crypto advocacy and lobbying group based in the US, has strongly opposed proposed Internal Revenue Service (IRS) regulations targeting crypto brokers.

In a comment letter submitted on November 13, the association argued that the rules, introduced by the IRS in August, overstepped the government’s authority and demonstrated a “fundamental misunderstanding” of digital assets and decentralized technology.

The proposed regulations, released by the U.S. Treasury Department, aimed to streamline the reporting and taxation of cryptocurrency transactions, addressing some of the challenges that exist today with crypto reporting.

However, the Blockchain Association made it clear in its letter that these rules would be particularly burdensome for participants in decentralized finance (DeFi), alleging that many in this space would be “fundamentally unable to comply.”

Unlike on centralized exchanges (CEXs), traders on decentralized exchanges (DEXs) and other DeFi protocols operate in a pseudonymous manner that makes it impossible for the developers behind the protocol to know who the users are.

Need to reconsider implications

In a statement shared on social media platform X, Kristin Smith, CEO of the Blockchain Association, emphasized the need for the Treasury Department to reconsider the implications of the expanded broker definition.

Smith argued that the proposed regulations could not only be “damaging and impractical” for developers of decentralized technology based in the US, but could also infringe on individuals’ privacy rights, potentially violating constitutional principles of privacy and freedom of expression.

“Needless to say, we cannot afford to push this entire, burgeoning technology to other jurisdictions. Doing so because of a misguided federal tax reporting requirement would be an unnecessary, ineffective, and self-inflicted blow,” she said.

If implemented, the current draft of the proposed law suggests that the rules on reporting crypto transactions could take effect in 2026 for transactions made in 2025.

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