By
Anisha Pandey
June 27th, 2024
ConsenSys is urging the US Internal Revenue Service (IRS) to postpone the implementation of new crypto tax reporting regulations.
ConsenSys, a leading blockchain development firm, is urging the US Internal Revenue Service (IRS) to postpone the implementation of new crypto tax reporting regulations. The company argues that the proposed rules lack clarity and uses excessively broad terms in ways that unnecessarily burden the entire industry, particularly for software developers.
ConsenSys Bemoans IRS’ Unclear Definitions and Heavy Burden on Businesses
The major point of argument for ConsenSys is the broad definition of a “broker” within the proposed regulations. Under these rules, various entities facilitating crypto transactions, including software developers like ConsenSys (creators of the popular MetaMask wallet), might be classified as brokers. This means, multiple parties could end up reporting the same transaction, causing complications and general confusion.
Furthermore, ConsenSys also criticizes the lack of clear instructions on how to complete the new Form 1099-DA, designed for reporting crypto transactions. In its letter to the IRS, ConsenSys pointed out that the form lacks clear instructions for brokers, raising even more challenges.
Privacy concerns are also among the issues raised by ConsenSys. The firm noted that the developers of self-custody wallets like MetaMask, may not have access to all the information required to fill out the transaction reporting forms, potentially compromising user privacy. An excerpt from the letter sent to the IRS by the software development firm reads:
“It cannot be more emphatically stated that providing software developers with a form that requires manual inputs would single-handedly destroy U.S. companies.”
ConsenSys also noted that the regulator has given little to no time for businesses to adjust accordingly. With the tax filing deadline fast approaching, businesses may not meet up in compliance with the new reporting requirements.
Rallying Call to Crypto Industry as Optimism Rises
It appears that ConsenSys aims to use the letter, which is publicly available, as a call to action for the general blockchain industry. Bill Hughes, the company’s senior counsel, encouraged other affected firms to voice their concerns to the IRS before the deadline for public comments.
Notably though, like ConsenSys, some prominent industry participants have also been airing their criticism of the proposed IRS regulations. The Crypto Council for Innovation CCI, for instance, noted that the idea of classifying unhosted wallet providers as brokers, is impracticable. That is because these entities do not possess complete transaction details or user identities as the reporting would require.
Generally, there is an air of optimism around the broader industry in terms of regulations. This was detailed in an earlier report by Coinspeaker where ConsenSys founder Joseph Lubin recently said the odds are now high that the regulatory crackdowns on crypto firms by the United States Securities and Exchange Commission (SEC) would soon come to an end.
Lubin’s views border on the Commission’s recent decision to end its prolonged battle with Ethereum (ETH price data). While the SEC has dropped its investigation into ETH, ConsenSys has assured that it will continue its lawsuit with the regulator and see it to a logical end. The lawsuit, which was filed in April, seeks to have the SEC provide better clarity regarding the regulation of cryptocurrencies.