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Blockchain Association Sues IRS Over Cryptocurrency Broker Rules

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Blockchain Association Pushes Back Against IRS Cryptocurrency Regulatory Move

The Blockchain Association is taking a strong stance against the latest cryptocurrency regulatory move by the United States Internal Revenue Service (IRS) with a joint lawsuit. 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 (DEXs).

New Rules Set to Take Effect in 2027

The new rules mandate that brokers disclose gross proceeds from sales of cryptocurrencies and other digital assets, including information regarding taxpayers involved in the transactions. This will apply to digital asset sales starting in 2027, with brokers needing to begin collecting and reporting the necessary data for digital asset transactions starting in 2026.

Affecting an Estimated 2.6 Million US Taxpayers

According to the IRS’ estimations, between 650 and 875 estimated DeFi brokers and up to 2.6 million US taxpayers will be affected by these final regulations. This has raised significant concerns for blockchain software developers, considering that other code developers have already been sanctioned for how their software is being used.

Blockchain Association Files Lawsuit Against IRS

In response to the new rules, the Blockchain Association and the Texas Blockchain Council filed a lawsuit against the IRS, announced Kristin Smith, the CEO of the Blockchain Association, in a December 28 Xpost:

"’Today we’re taking action, filing a lawsuit that argues today’s broker rulemaking violates the Administrative Procedure Act and is unconstitutional.’"

Concerns Over Privacy Rights

Some legal experts consider the IRS’ new rules to be an infringement of the privacy rights of DeFi users. The IRS’ new definition of ‘broker’ includes DeFi trading front-ends, which do not effectuate transactions. Marisa Coppel, Head of Legal, Blockchain Association, wrote:

"Not only is this an infringement on the privacy rights of individuals using decentralized technology, it would push this entire, burgeoning technology offshore."

Blockchain Association Continues to Stand with Innovators and Users

The Blockchain Association continues to stand with the innovators and users of DeFi, and will continue to fight this misguided rulemaking. The decision raises significant concerns for blockchain software developers, considering that other code developers have already been sanctioned for how their software is being used.

Tornado Cash Developer Sentenced for Money Laundering

Notably, Tornado Cash developer Alex Pertsev was found guilty of money laundering by Dutch judges at the s-Hertogenbosch Court of Appeal on May 14. He was sentenced to five years and four months for allegedly laundering $1.2 billion worth of illicit funds despite Tornado Cash being a non-custodial cryptocurrency mixer.

Crypto Mixing is ‘Not a Crime’, Says CryptoQuant CEO

The IRS’ new regulation is an "infringement" on the privacy rights of DeFi users, according to some legal experts. The decision raises significant concerns for blockchain software developers, considering that other code developers have already been sanctioned for how their software is being used.

South Korea Sanctions 15 North Koreans for Crypto Heists and Cyber Theft

The IRS’ rules will apply to digital asset sales starting in 2027. Brokers will need to begin collecting and reporting the necessary data for digital asset transactions starting in 2026.

Estimated 650-875 DeFi Brokers Affected by Final Regulations

According to the IRS’ estimations, between 650 and 875 estimated DeFi brokers and up to 2.6 million US taxpayers will be affected by these final regulations.

What Does This Mean for the Future of Crypto?

The Blockchain Association continues to stand with the innovators and users of DeFi, and will continue to fight this misguided rulemaking. The decision raises significant concerns for blockchain software developers, considering that other code developers have already been sanctioned for how their software is being used.

Conclusion

The new rules issued by the IRS are a significant blow to the cryptocurrency industry, with some legal experts considering them an infringement of the privacy rights of DeFi users. The Blockchain Association has filed a joint lawsuit against the IRS, arguing that the rulemaking violates the Administrative Procedure Act and is unconstitutional.

Key Takeaways:

  • The IRS issued final regulations requiring brokers to report digital asset transactions.
  • The new rules will apply to digital asset sales starting in 2027, with brokers needing to begin collecting and reporting the necessary data for digital asset transactions starting in 2026.
  • Between 650 and 875 estimated DeFi brokers and up to 2.6 million US taxpayers will be affected by these final regulations.
  • Some legal experts consider the IRS’ new rules to be an infringement of the privacy rights of DeFi users.
  • The Blockchain Association continues to stand with the innovators and users of DeFi, and will continue to fight this misguided rulemaking.

Sources:

  • "IRS Issues Final Regulations on Digital Asset Reporting" by [Source]
  • "Blockchain Association Files Lawsuit Against IRS" by [Source]

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