Regulatory

New Crypto Tax Rules Add Requirements on Some Market Players, Exempt Miners

BitOoda Regulatory Analysis, 8/30/23

Tom Nath
Key Takeaway #1

U.S. Treasury issued long-awaited tax rules increasing the requirements for crypto market participants – including “brokers” – to report tax and customer information to the IRS.

Key Takeaway #2

The rules exempt crypto miners, stakers, validators, and some decentralized platforms from the new requirements.

Key Takeaway #3

The proposal represents a balanced initial step to close a key regulatory gap in a complex area.

Key Takeaway #4

Late last week, the U.S. Treasury Department released the text for proposed regulations that would increase the reporting requirements for a number of participants in the digital asset ecosystem.

These provisions of the 2021 infrastructure law were designed to bring crypto tax rules into alignment with other sectors, and – critically –  adds the term “broker” to those required to report tax and customer information to the IRS.

The rules – after a review and public comment period likely to take a number of months – would take effect for the 2025 tax year.

One of the most significant points of contention during the crafting of the rules was the definition of “broker.” The final proposal released on Friday exempts cryptocurrency miners, stakers, and validators, as well as some decentralized platforms from the reporting requirements. Centralized trading platforms and payment processors would have to report crypto sales to the IRS, as would decentralized platforms that operate without a third-party clearing agent. In addition, NFT transactions and wallet providers would be included in the reporting requirements.

Given the wide spectrum of political views with respect to these rules – with some U.S. legislative leaders touting the bill, some decrying the implementation delays, and others complaining that it doesn’t go far enough to go after tax evaders – our view is that this is a good first step to close the regulatory gap on a complex area of digital asset governance.

That said, a number of digital asset advocacy organizations have criticized the proposals as attempting to apply traditional financial structures to digital assets, particularly focusing on the use of financial intermediaries in a space intended to be largely decentralized and globally accessible.

In addition, DeFi proponents point out that the rules could effectively label decentralized platform developers as “brokers” if the site facilities crypto transactions.

Given the inevitability of the issuance of crypto tax rules, there will be winners and losers in any proposal. Moreover, the persistent attempts by crypto advocates to claim it’s impossible to obtain and share accurate customer information with regulators is increasingly (and rightfully) falling on deaf ears. Regulated firms and platforms participating in the digital asset economy by providing products and services to investors (retail or institutional) should be required (and able) to follow the law with respect to AML/KYC and other core compliance obligations underpinning the financial system.

Please reach out to us with questions about these new proposed rules or other implications of the ever-evolving digital asset regulatory landscape.

‍

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Table of contents

Example H2

Research By

Tom Nathac

COO | Regulatory Research

tnath@bitooda.io

Trevor Levineac

General Counsel | Regulatory Research

tlevine@bitooda.io

‍

Late last week, the U.S. Treasury Department released the text for proposed regulations that would increase the reporting requirements for a number of participants in the digital asset ecosystem.

These provisions of the 2021 infrastructure law were designed to bring crypto tax rules into alignment with other sectors, and – critically –  adds the term “broker” to those required to report tax and customer information to the IRS.

The rules – after a review and public comment period likely to take a number of months – would take effect for the 2025 tax year.

One of the most significant points of contention during the crafting of the rules was the definition of “broker.” The final proposal released on Friday exempts cryptocurrency miners, stakers, and validators, as well as some decentralized platforms from the reporting requirements. Centralized trading platforms and payment processors would have to report crypto sales to the IRS, as would decentralized platforms that operate without a third-party clearing agent. In addition, NFT transactions and wallet providers would be included in the reporting requirements.

Given the wide spectrum of political views with respect to these rules – with some U.S. legislative leaders touting the bill, some decrying the implementation delays, and others complaining that it doesn’t go far enough to go after tax evaders – our view is that this is a good first step to close the regulatory gap on a complex area of digital asset governance.

That said, a number of digital asset advocacy organizations have criticized the proposals as attempting to apply traditional financial structures to digital assets, particularly focusing on the use of financial intermediaries in a space intended to be largely decentralized and globally accessible.

In addition, DeFi proponents point out that the rules could effectively label decentralized platform developers as “brokers” if the site facilities crypto transactions.

Given the inevitability of the issuance of crypto tax rules, there will be winners and losers in any proposal. Moreover, the persistent attempts by crypto advocates to claim it’s impossible to obtain and share accurate customer information with regulators is increasingly (and rightfully) falling on deaf ears. Regulated firms and platforms participating in the digital asset economy by providing products and services to investors (retail or institutional) should be required (and able) to follow the law with respect to AML/KYC and other core compliance obligations underpinning the financial system.

Please reach out to us with questions about these new proposed rules or other implications of the ever-evolving digital asset regulatory landscape.

‍

‍

Disclosures

Purpose

This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.

Analyst Certification

Tom Nath, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.

Conflicts of Interest

This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.

General Disclosures

Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or through http://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge.  BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services.  BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.

The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision.  The Information is not a recommendation to engage in any transaction.  The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment.  The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance. 

All derivatives brokerage is conducted by Ooda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.

BitOoda Technologies, LLC is a member of FINRA.

“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.

Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.

‍

Download This Report

Table of contents

Example H2

Research By

Tom Nathac

COO | Regulatory Research

tnath@bitooda.io

Trevor Levineac

General Counsel | Regulatory Research

tlevine@bitooda.io

‍

Late last week, the U.S. Treasury Department released the text for proposed regulations that would increase the reporting requirements for a number of participants in the digital asset ecosystem.

These provisions of the 2021 infrastructure law were designed to bring crypto tax rules into alignment with other sectors, and – critically –  adds the term “broker” to those required to report tax and customer information to the IRS.

The rules – after a review and public comment period likely to take a number of months – would take effect for the 2025 tax year.

One of the most significant points of contention during the crafting of the rules was the definition of “broker.” The final proposal released on Friday exempts cryptocurrency miners, stakers, and validators, as well as some decentralized platforms from the reporting requirements. Centralized trading platforms and payment processors would have to report crypto sales to the IRS, as would decentralized platforms that operate without a third-party clearing agent. In addition, NFT transactions and wallet providers would be included in the reporting requirements.

Given the wide spectrum of political views with respect to these rules – with some U.S. legislative leaders touting the bill, some decrying the implementation delays, and others complaining that it doesn’t go far enough to go after tax evaders – our view is that this is a good first step to close the regulatory gap on a complex area of digital asset governance.

That said, a number of digital asset advocacy organizations have criticized the proposals as attempting to apply traditional financial structures to digital assets, particularly focusing on the use of financial intermediaries in a space intended to be largely decentralized and globally accessible.

In addition, DeFi proponents point out that the rules could effectively label decentralized platform developers as “brokers” if the site facilities crypto transactions.

Given the inevitability of the issuance of crypto tax rules, there will be winners and losers in any proposal. Moreover, the persistent attempts by crypto advocates to claim it’s impossible to obtain and share accurate customer information with regulators is increasingly (and rightfully) falling on deaf ears. Regulated firms and platforms participating in the digital asset economy by providing products and services to investors (retail or institutional) should be required (and able) to follow the law with respect to AML/KYC and other core compliance obligations underpinning the financial system.

Please reach out to us with questions about these new proposed rules or other implications of the ever-evolving digital asset regulatory landscape.

‍

‍

Disclosures

Purpose

This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.

Analyst Certification

Tom Nath, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.

Conflicts of Interest

This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.

General Disclosures

Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or through http://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge.  BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services.  BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.

The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision.  The Information is not a recommendation to engage in any transaction.  The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment.  The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance. 

All derivatives brokerage is conducted by Ooda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.

BitOoda Technologies, LLC is a member of FINRA.

“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.

Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.

‍

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