Crypto Community Reacts To New IRS DeFi Reporting Rules

DeFi IRS US Treasury

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Julia Smith

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Julia Smith

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Julia is an experienced editor with a passion for covering a wide variety of beats. She loves all things politics and regularly covers regulatory updates on emerging technology here for Crypto News.

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December 27, 2024

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The crypto community has taken to social media to express its grievances after the U.S. Treasury and Internal Revenue Service (IRS) launched their updated DeFi tax reporting requirements on Friday.

U.S. Treasury, IRS Announce DeFi Tax Requirements

As part of the regulation, digital asset brokers will be required to report on the gross proceeds of DeFi crypto sales through a 1099 form.

The updated filing seems to pertain to front-end service providers and will ultimately treat DeFi brokers the same as securities brokers and custodied crypto trading platforms.

The latest DeFi guidelines are set to go into effect on January 1, 2027.

“These regulations will help ensure that all taxpayers play by the same set of rules and have access to the information they need to file their taxes accurately,” said Aviva Aron-Dine, Performing the Duties of Assistant Secretary for Tax Policy.

“Aligning tax reporting requirements for digital assets with reporting for other assets will make filing easier and cheaper for compliant taxpayers while also helping close the tax gap,” she added.

The Crypto Community Pushes Back

Following the federal government’s announcement, several key players in the digital asset space took to X to share their concerns over the IRS’ latest rulemaking.

“Today’s broker rulemaking by the IRS and Treasury – days before the end of the year – is a disappointing, but expected, final attempt to send the American crypto industry offshore,” said Blockchain Association CEO Kristin Smith.

“On behalf of the industry, we’re prepared to take aggressive action to fight back,” she added. “We also look forward to working with the new pro-crypto Congress and Administration to roll back this and other anti-innovation rules.”

“Treasury/IRS just dropped their DeFi broker regs, which impose substantial centralized reporting requirements on DeFi (starting Jan 1, 2027), and hoover up user data to the govt,” said Paradigm’s vice president of government affairs, Alexander Grieve. “The new pro-crypto Congress can, and should, roll these back via the CRA process next year.”

Following the regulatory update, it seems DeFi’s best hope for a tax reporting reversal will come when President-elect Donald Trump returns to the Oval Office next month.

Trump has pledged to overhaul digital asset regulation in the U.S.

Most recently, the New York-born businessman tapped crypto-friendly former SEC commissioner Paul Atkins to lead the federal agency.

It remains to be seen what, if any, changes Trump will make related to crypto accounting requirements.