The organization is unhappy with the tax agency’s stance on cryptocurrencies
The Blockchain Association has filed a lawsuit against the Internal Revenue Service (IRS), challenging new regulations requiring detailed reporting of digital asset transactions. The lawsuit, announced by Blockchain Association CEO Kristin Smith on December 28, was filed jointly with the Texas Blockchain Council. The groups argue that the IRS has overstepped its authority and violated the Administrative Procedure Act.
Today we’re taking action, filing a lawsuit that argues today’s broker rulemaking violates the Administrative Procedure Act and is unconstitutional.
We stand with our nation’s innovators and will continue working to ensure the future of crypto – and DeFi – is here in the United… https://t.co/CwZWzjwT5O
— Kristin Smith (@KMSmithDC) December 28, 2024
The contested regulations, finalized on December 27, expand reporting requirements to include decentralized exchanges (DEXs) and other front-end platforms involved in cryptocurrency transactions. These rules, set to take effect in 2027, mandate that brokers disclose gross proceeds from digital asset sales and provide identifying information about the taxpayers involved.
The IRS estimates that the regulations could impact over 2.6 million US taxpayers and between 650 to 875 DeFi brokers.
Critics argue that the broad definition of “broker” now includes decentralized finance (DeFi) platforms and developers of smart contracts who facilitate digital asset transactions. This, they claim, unfairly burdens software developers and threatens the privacy rights of individuals using decentralized technology. The Blockchain Association has called the rulemaking process unconstitutional, stating that it imposes unlawful compliance demands on developers of trading infrastructure.
The lawsuit is part of a broader concern within the blockchain community over increasing government regulation. Some worry the rules could drive innovation offshore, stifling growth in the US blockchain sector.
Legal experts have also raised concerns about privacy infringements and the potential for overreach, citing examples like the case of Tornado Cash developer Alex Pertsev, who was convicted of money laundering despite his software being a non-custodial tool.
The Blockchain Association has pledged to continue advocating for the rights of blockchain developers and users, emphasizing the need for balanced regulations that foster innovation without compromising privacy.
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