The US Treasury Department has officially unveiled its long-anticipated DeFi broker tax reporting framework, aiming to capture revenue from the rapidly growing decentralized finance (DeFi) sector. Under the new guidelines, platforms offering trading services will be required to report user transactions to the Internal Revenue Service (IRS).
Key Highlights and Controversy Surrounding the DeFi Broker Tax Framework
According to a summary provided by ConsenSys attorney Bill Hughes, the reporting requirements will apply to both U.S. and non-U.S. persons operating on DeFi platforms. Compliance with this framework is set to begin in 2027.
Once compliance takes effect, the IRS will mandate that DeFi brokers issue Form 1099 to platform users for tax reporting purposes. Traditionally, DeFi protocols operate as non-custodial platforms, meaning they do not store users’ biometric information or funds. However, the new reporting framework may necessitate significant operational changes. To meet these requirements, protocols may need to collect sensitive user details, such as names, transaction histories, addresses, and other personal data.
These provisions have sparked significant backlash within the crypto community. Bill Hughes noted that the new framework is likely to face legal challenges, with lawsuits potentially aiming to overturn the rules. He emphasized that the tax provisions would affect all asset classes, including NFTs and stablecoins.
Hughes also revealed that the US Treasury had finalized the DeFi broker tax rules some time ago but strategically delayed their release until the closing weeks of the current administration.
Will the Incoming Trump Administration Reverse the Rules?
The crypto industry has been bracing for the impact of these tax reporting requirements. Now that the framework is official, hopes are shifting to the incoming Donald Trump administration for potential amendments.
Much of this optimism is tied to the nomination of Scott Bessent as the next Treasury Secretary. Unlike Janet Yellen, Scott Bessent is considered pro-crypto and may be more sympathetic to industry concerns. Critics of the framework argue that it prioritizes cost-focused regulation over revenue generation and significantly compromises user privacy.
Interestingly, the President-elect’s family recently launched a DeFi venture called World Liberty Financial. Should the framework remain unchanged, this venture would also need to comply with the new rules—a scenario that could incentivize the administration to advocate for adjustments or rollbacks to the regul
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