The United States Internal Revenue Service’s (IRS) new ruling, which holds decentralized exchanges to the same reporting requirements as traditional brokers, has left crypto executives and legal professionals skeptical about its longevity.
‘No Shortage of Ways to Challenge This’
Decentralized crypto exchange Uniswap chief legal officer Katherine Minarik expressed her doubts about the ruling’s durability. In a recent interview, she stated:
"No shortage of ways to challenge this, and it absolutely should be challenged."
Minarik emphasized that the industry will likely face significant challenges in adapting to the new regulations.
Industry Experts Weigh In
Uniswap CEO Hayden Adams echoed Minarik’s sentiments, expressing hope that the ruling would be rejected under the Congressional Review Act. If not, he is optimistic that it won’t withstand legal challenges.
On December 27, the IRS issued final regulations requiring brokers to report digital asset transactions, expanding existing reporting requirements to include front-end platforms, such as decentralized exchanges.
The Impact of the New Ruling
Crypto tax platform Koinly CEO Robin Singh highlighted the significant costs associated with implementing the necessary reporting systems. He stated:
"For businesses operating in the DeFi space, compliance with these regulations will require both operational and technical innovation."
Singh noted that decentralized platforms lack the centralized structures needed for traditional reporting, creating a substantial hurdle for many companies.
‘All Cost, No Benefit’
Blockchain development firm Consensys lawyer Bill Hughes described the ruling as "all cost, no benefit" from a revenue perspective. He stated:
"The outgoing administration is not leaving quietly. The fight continues."
Hughes emphasized that the ruling will require front-end platforms to track and report on both US and global users, applying to the sale of all digital assets, including non-fungible tokens (NFTs) and stablecoins.
The Road Ahead
Hughes believes that the rule will likely come under Congressional review, where it can be disapproved of. He also suggested that the timing of the ruling’s release was intentional, coinciding with a holiday stretch in December 2024.
Implications for the Industry
The new ruling has sparked concerns among industry professionals about the potential implications for decentralized exchanges and other front-end platforms. The requirement to report on both US and global users will undoubtedly present significant challenges for businesses operating in this space.
As the industry continues to navigate these complex regulations, one thing is clear: the fight against this ruling is far from over.
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