The US Department of the Treasury and the Internal Revenue Service (IRS) have introduced new guidelines outlining reporting requirements for crypto brokers.
On August 29, the US Small Business Administration’s Office of Advocacy disclosed that the proposal pertaining to cryptocurrency regulations for brokers had been unveiled.
Effective January 1, 2025, digital asset brokers, which include trading platforms, payment processors, and specific hosted wallet providers, will be obligated to report the gross proceeds generated from all digital asset sales or exchanges.
These entities, referred to as “digital asset middlemen” in the document, will also be tasked with reporting gains and losses resulting from cryptocurrency transactions, with this provision set to take effect from January 1, 2026.
The Federal Register, which released a document related to this proposal, anticipates that these regulations will enhance “higher levels of taxpayer compliance,” providing the IRS with more comprehensive insights into taxpayers’ earnings.
Moreover, the Treasury and the IRS are seeking input from small businesses in the US regarding the potential impact of these regulations on their operations. A public hearing is scheduled for November 7, 2023, to facilitate this initiative.
Once enacted, the regulations will require brokers operating in the US to submit information returns to the IRS using the newly introduced Form 1099-DA and furnish payee statements to their clients.
In a related development, the US Government Accountability Office, a congressional oversight body, has released a 77-page report emphasizing the critical need for more robust regulations in the cryptocurrency sphere.
Blockchain technology—like #cryptocurrency—could offer faster, cheaper financial transactions. But recent price crashes & bankruptcies have raised concerns about gaps in federal regulations that could put consumers at risk. Our new report & video explore: https://t.co/1vyIgZVaYi pic.twitter.com/nxHrk1g5dQ
— U.S. GAO (@USGAO) July 24, 2023
The report specifically highlighted the spot markets for non-security crypto assets as a key area lacking regulatory oversight.
It advocated for the appointment of a federal regulator to comprehensively oversee these markets, a measure that could potentially mitigate financial stability risks and enhance user protection on these platforms.
The report underscored the disparity between the current state of cryptocurrency regulation and the well-established regulatory framework in place for traditional assets.
