US Treasury and IRS Proposal Could Destroy American DeFi Industry, Warns Blockchain Association

According to Decrypt, the Blockchain Association has warned that a proposed redefinition of the term 'broker' in a federal tax rule by the U.S. Treasury and the Internal Revenue Service (IRS) could potentially destroy or push offshore any decentralized finance (DeFi) project in the United States. In a 33-page comment submitted to the IRS, the leading crypto lobbying group argued that the proposed change would broaden the term 'broker' to apply to any centralized crypto exchange operating in the United States or any crypto project that directly or indirectly facilitates the transfer of digital assets belonging to another person. This would make American centralized exchanges and decentralized finance projects subject to the same reporting rules as bond and stock brokers, which the Blockchain Association claims is an impossible standard to impose on DeFi projects. The group's argument is based on the fact that the entire purpose of DeFi is to create trustless financial systems by leveraging smart contracts and automation to prevent a project's creator from having control over or access to users' finances and information. The Blockchain Association believes that any attempt to link wallet addresses to personal identities would create a serious and permanent privacy issue for users. The proposed IRS rule has been open for a 74-day period of public comment that ends today, and has received over 124,000 public comments. The IRS held a public hearing regarding the rule, after which it will decide on its adoption. Marisa Tashman Coppel, senior counsel at the Blockchain Association, who spoke at the hearing, said that IRS regulators were engaged and asked thoughtful questions, suggesting they are taking seriously the concerns regarding decentralized tech, NFTs, and stablecoins.