The new rules aim to “increase taxpayer compliance levels."
The US Department of the Treasury and the Internal Revenue Service (IRS) have jointly unveiled a set of proposed rules to regulate cryptocurrency brokers.
Unveiled on August 29th, the proposal was first made public by the Office of Advocacy of the US Small Business Administration.
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The office specified that the draft regulations are designed to report gross proceeds for all digital asset sales or exchanges by brokers like "trading platforms, payment processors, and certain hosted wallet providers," effective January 1st, 2025.
On top of that, the brokers, categorized as “digital asset middlemen” in the proposed regulations, will be required to disclose information on profits and losses generated through the sale of cryptocurrencies. This additional requirement is planned to be enforced from January 1st, 2026.
According to documents published in the Federal Register, new rules aim to “increase taxpayer compliance levels” by giving the IRS clearer visibility into taxpayers’ income from digital assets.
The Treasury Department and the IRS have planned a public hearing for November 7th, 2023, inviting small business owners to discuss how the proposed rules might impact them. It is worth noting that US regulators are especially interested in receiving feedback before the regulations become law.
Upon enactment, the new regulations would require all US brokers to file informational returns with the IRS using a newly introduced Form 1099-DA as well as furnish payee statements to their customers.
The proposed rules signify a crucial step in US efforts to regulate the rapidly growing cryptocurrency market. Aimed at enhancing transparency and taxpayer compliance, the rules, once enacted, could set a precedent for global cryptocurrency regulations. They would fill a critical regulatory gap and provide better protections for platform users, aligning crypto assets more closely with traditional financial assets.
In other news, the US Financial Accounting Standards Board (FASB) has ratified new guidelines that will positively impact companies holding crypto.
