IRS Clarifies Broker Status for Digital Asset Platforms in New Regulations
by aria-crypto.com
December 27, 2024 at 18:41
IRS Clarifies Broker Status for Digital Asset Platforms in New Regulations
The United States Internal Revenue Service (IRS) has unveiled new regulations that require brokers, including decentralized exchanges, to report digital asset transactions. Set to be enforced starting in 2027, these rules extend reporting obligations to front-end platforms which act as intermediaries in the trade of cryptocurrencies and other digital assets. Under these regulations, platforms facilitating these transactions—particularly those involving DeFi front-ends—are classified as brokers.
This classification is crucial as the IRS seeks to streamline and enforce tax compliance across emerging financial technologies. Only trading front-end service providers within the DeFi sector are recognized as brokers, narrowly focusing the broad definition to a specific group of participants. The rules will not apply uniformly across all DeFi applications, indicating a nuanced approach to different levels of decentralization and control.
The IRS emphasizes that this regulatory adjustment simply aligns digital asset transactions with longstanding financial regulations, maintaining that similar rules have governed brokers for over four decades. Up to 2.6 million taxpayers could be impacted by this change, along with estimated 650 to 875 DeFi platforms classified under the new broker definition. These platforms will need to begin collecting and submitting the requisite transaction data in 2026, a year prior to the official rule implementation.
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