U.S. Senators Urge Treasury & IRS To Enact Crypto Tax Reporting Rules Before 2026

The proposed regulation by the Treasury Department and the IRS aims to regulate the vast and complex world of crypto trading and tax reporting

By Shashank Bhardwaj

2 min read

Published: Oct 12, 2023 11:54:12 AM IST

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In an Oct 10 letter addressed to the U.S. Treasury Department and Internal Revenue Service (IRS), seven U.S. senators have urged the regulators to implement recently proposed tax reporting requirements for crypto brokers as swiftly as possible.

The lawmakers’ concerns arose following the agencies’ two-year delay in proposing the rule. According to the seven senators, the crypto tax reporting requirements proposed by the IRS in August and scheduled to go into effect in 2026 aren’t soon enough.

In the letter, the Senators praised several elements of the proposed regulation, including how the rule defines “brokers” and “digital assets.”

The rule defines “brokers” as any party facilitating crypto sales and knowing the seller’s identity and the transaction’s nature. It encompasses anyone who functions as a broker—even if the broker disregards customer information to escape regulatory scrutiny.

The rule defines a digital asset as “a digital representation of value that is recorded on a cryptographically secured distributed ledger (or similar technology).” This definition is broad enough to allow the Treasury Department and IRS to adapt their regulations to an ever-changing and fast-moving industry.

While appreciating the proposal, the senators highlighted their concerns regarding the timeline for the rule’s implementation. They wrote, “Although we are pleased that the Administration has proposed a strong rule that would help close the massive crypto tax gap, we are alarmed by the self-inflicted two-year delay for the rule’s implementation, which would contravene the requirements of the bipartisan Infrastructure Investment and Jobs Act, disadvantage law-abiding Americans, and cause the federal government to lose out on billions of dollars in tax revenue.”

The Senators urged the agencies to take faster action. “Limiting any further delay in the implementation of the Administration’s proposed rule would combat industry efforts to evade regulation, provide clarity to law-abiding taxpayers, and generate billions in tax revenue from a chronically tax-avoidant industry,” the Senators wrote.

The crypto ecosystem in the U.S. has been in need of broker reporting requirements for a long time. The proposed rule by the Treasury and IRS will assist law-abiding crypto users in filing taxes and help the federal government curb tax fraud. This proposal will align the crypto industry with other financial industries in the U.S. by imposing standard tax reporting requirements on brokers.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash