Crypto Industry Skeptical Of IRS Ruling On Decentralized Exchanges

According to Cointelegraph, the recent ruling by the United States Internal Revenue Service (IRS) has sparked skepticism among crypto executives and legal professionals. The ruling mandates that decentralized exchanges adhere to the same reporting requirements as traditional brokers. Katherine Minarik, chief legal officer of decentralized crypto exchange Uniswap, expressed doubts about the ruling's longevity, suggesting there are numerous ways to challenge it. She emphasized the need for a limiting principle in the regulation of technology beyond the crypto industry. Uniswap CEO Hayden Adams also voiced his concerns, hoping the ruling would be overturned under the Congressional Review Act. He remains optimistic that it will not withstand legal challenges. The IRS's final regulations, issued on December 27, require brokers to report digital asset transactions, extending existing requirements to include decentralized exchanges. These rules, set to be implemented in 2027, demand brokers disclose gross proceeds from cryptocurrency sales and provide information about the taxpayers involved. The regulation specifies that only trading front-end service providers in the DeFi space are treated as brokers. Robin Singh, CEO of crypto tax platform Koinly, highlighted the potential costs of implementing the necessary reporting systems. He noted that compliance would require significant operational and technical innovation, as decentralized platforms inherently lack the centralized structures needed for traditional reporting. This presents a substantial challenge for many companies operating in the DeFi space. Bill Hughes, a lawyer at blockchain development firm Consensys, criticized the ruling as "all cost, no benefit" from a revenue perspective. He remarked that the outgoing administration is not leaving quietly, indicating ongoing resistance to the ruling. Hughes pointed out that the regulation would require front-end platforms to track and report transactions involving both US and global users, covering all digital assets, including NFTs and stablecoins. He echoed Adams' sentiment, suggesting the rule is likely to face Congressional review, where it could be disapproved. Hughes also noted the timing of the ruling's release, implying it was strategically issued during a holiday period.