How the Crypto Industry Responded to the IRS Proposed Broker Rule

I was just going to write about spending several hours in a Costco, but luckily perhaps for all of us, there are somewhat more important things happening in crypto and regulation. Such as: we have just passed the first deadline for comments on the IRS proposal to classify certain types of crypto entities as brokers for tax reporting purposes. There’s going to be a public hearing later today (and tomorrow) discussing these comments, although the actual comment deadline has been extended by a few weeks.

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The narrative

We’re coming up on a comment deadline for the IRS’ proposed rule for enforcing broker reporting requirements on certain types of crypto entities and transactions.

Why it matters

The U.S. Treasury Department and IRS are poised to bring fresh crypto tax reporting rules into effect. The crypto industry largely seems opposed – the majority of comments I read urged caution or raised concerns about the proposal as written while only a relative few seemed to support it.

Breaking it down

A few months ago, the U.S. Treasury Department put out its long-awaited proposed rule for enforcing broker reporting standards on cryptocurrency entities. The proposal suggested capturing hosted wallet providers, payment processors, some decentralized finance (DeFi) entities and others as “brokers,” meaning these groups would be subject to specific crypto tax reporting requirements. The Treasury also announced a public comment period, asking for feedback on the overall rule, and also asking specific questions about different provisions detailed within the document.

Over 117,000 comments were received as of Nov. 6, and just under 40,000 of those were posted online (it seems like they’re getting posted as Treasury officials read them).

I read…some of them. I can’t really estimate how many because I closed a lot of the repetitive ones pretty quickly, and at some point started filtering out anonymous ones (many of which echoed the main themes I touch on below). Let’s say more than a few, less than a lot and nowhere near 40,000.

A few main themes emerged over the limited selection of comments I read through: privacy implications, reporting…