Nov 13, 2023

The U.S. Internal Revenue Service (IRS) has a public hearing slated on Monday about proposed regulations for digital asset transactions.

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. Exciting day today because the IRS has a public hearing scheduled today about a proposed regulation for digital asset transactions. Joining us now to discuss is coin desk, global policy and regulation, managing editor Nick Day who is also the editor of the Relative Lease Embankment Friedli Coin Desk state of crypto newsletter. Happy Monday, Nick. Good morning. OK. So what is this whole thing about with the IRS? Usually when I hear the letter, the letters IRS put together, I run for the hills. Yeah. So you know, this is uh exactly what miles was just talking about the IRS has this proposal for how it would define the term broker and implement certain crypto uh tax reporting rules for uh you know, broad swaths of the crypto ecosystem including defi certain defi entities, but importantly, not including, you know, miners, for example. Uh this is uh you know, as miles mentioned, the result of I would say it was 2021. Now I was gonna say last year, but no, it's been a couple of years, the infrastructure investment and Jobs Act, otherwise known as a bipartisan infrastructure bill that had this, you know, crypto provision included in a bid to raise revenue off of crypto operations for the US government. So we've seen over 100 and 20,000 comments flow in there is a public hearing kicking off in about 20 minutes or so. Uh where the IRS will allow and listen to uh members of the public. Basically just provide, you know, their verbal feedback to the uh proposed rules and, and, and what happened? Oh, go, how can the proposal make impact the DFI sector? I know a lot of those comments that are coming in are about some of the comments on D FI and whether or not what's being proposed is enforceable or practical talk to us about what's going on there. Yeah, you know, this actually goes again right back to what you guys were talking about with miles just a minute ago. Uh One of the bigger questions is whether or not decentralized platforms have the capability of collecting and uh you know, storing and transmitting user KYC data. Um You know, a lot of the five platforms, uh decentralized exchanges, uh et cetera. Uh don't really, you know, not really designed with this idea of, oh, we gotta make sure we know who our users are uh in mind, right? So I think that's one concern, a couple other concerns that we've seen, you know, throughout a lot of the comments range from privacy concerns about whether or not the platforms collecting this data are safe to uh you know, just general concerns about the volume of data and how that might impact the entities involved. So there, there are a couple of concerns and certainly d five platforms are going to get caught up in a lot of those concerns. So uh what happens after the comments? Like what, what's the process now? So this is just the, I guess third step after the drafting of the comments, uh we're going to see the IRS possibly publish a new version uh based on any feedback it receives. Um And you know, again to miles's point earlier, the IRS did come out with a proposal that said, you know, we want feedback on, you know, a good chunk of it. They had specific questions, they had questions about broader feedback on the entire overall proposal. So, you know, presumably they'll have a way of incorporating that in whatever the next version is. Um you know, it's unclear whether they're gonna choose to go for another comment period or not or if they'll just say, OK, here's the final rule that we intend to propose, uh you know, give us feedback and then we're gonna make it a final official rule and this is how the US crypto industry has to file taxes. But, you know, we got uh I think a bit of a ways to go before we get to that point. So right now, we're still gonna, we'll see more feedback, we'll see more, uh you know, versions of the IRS proposal, Nick. Any idea on how far of a ways we have to go until we have a final rule. How long does a process like this usually take? Uh It's definitely, it's definitely not happening this year. Um Yeah, I would expect the IRS is gonna probably need some time to get through all the comments again. There's more than 100 and 20,000 as of last Friday, which is, uh, you know, I don't know if you've ever read 100 20,000 letters in a row, but, uh, it's a bit of a bit of a slog. So I imagine it'll probably take them a couple of months just to get through all of that, uh, bit more time to incorporate all of that. Uh, and to figure out, you know, which comments they want to ignore or if not ignore, at least which comments they can easily discard because they're off topic or, you know, irrelevant to what they're trying to do. Um, you know, my, if I had to speculate, my best guess is sometime like middle of next year, we might start seeing a bit more, uh, you know, progress on this, but that's again, purely wild guess for here. 100 and 20,000 letters. I, I can imagine Lawrence probably your fan mail, you might be able to relate with the IRS reading 100 and 20,000 letters. All right, it be possible. Oh, yeah. No, it's too busy. Nick. Thanks so much for joining us this morning. We'll see you tomorrow. Thank you. That was Coindesk global policy and regulation. Managing editor Nick Day. Don't forget to sign up for the state of crypto newsletter on

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