US Proposes New Guidelines For Brokers To Boost Tax Compliance
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The US Department of Treasury has partnered with the Internal Revenue Service for new proposals for “brokers,” including crypto trading firms, payment processors, and wallet providers. The proposed guidelines will see brokers report some crypto sales and transactions done on exchanges.
US proposes new rules for brokers
The US Treasury Department said that the new regulatory framework was part of an effort by the government to implement the Infrastructure Investment and Jobs Act. The legislation has since been signed into law, and it seeks to boost infrastructure development across the United States and set up more jobs.
The regulation proposed by the Treasury Department seeks to prevent tax evasion. It will also help market participants calculate the taxes for a digital asset sale and exchange transaction.
The US Treasury also said that taxpayers paid taxes on gains under the current legislation. Taxpayers are also entitled to deduct losses on digital assets when sold. However, many participants in this market find it challenging and costly to determine their gains.
“These proposed rules require brokers to provide a new Form 1099-DA to help taxpayers determine if they owe taxes, and would help taxpayers avoid having to make complicated calculations or pay digital asset tax preparation services in order to file their tax returns,” the statement said.
According to the Treasury, the new law will ensure crypto brokers operate under the same tax reporting guidelines as firms offering securities and other financial instruments. The rules also align with tax reporting requirements on digital assets while avoiding preferential treatment between different kinds of assets.
New regulation draws criticism
The new regulatory framework has attracted much criticism from some legislatures and across the industry. The Chairman of the US House of Representatives Financial Services Committee, Patric McHenry, said that the proposal was an attempt by the Biden administration to continue attacking the digital asset space.
McHenry took over the leadership role at this committee after last year’s mid-term elections. He said that the Biden administration needed to end its effort to hamper the growth of the digital asset space across the US. According to McHenry, the Biden administration needed to work with Congress to formulate clear guidelines for the industry.
He also said that he would push the Keep Innovation in America Act to protect innovation and the privacy of market participants. The bipartisan solution would ensure that the growth of the digital asset space in the US is covered.
The crypto community on Twitter has also criticized the regulation. The CEO of Blockchain Association, Kristin Smith, opined that it was essential to understand that the crypto ecosystem operated differently from the traditional asset space.
As such, rules in the crypto sector need to be customized in a way that will not capture the participants in the ecosystem who are not well-versed in the best way to remain compliant.
