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The U.S. House Ways and Means Committee has come out against a hotly contested new IRS regulation aimed at the decentralized finance (DeFi) market. The regulation, requiring DeFi brokers to gather and report user data for tax purposes, has been the subject of fierce opposition from lawmakers and industry leaders.
What Is the New IRS Rule?
The IRS wants to regulate some DeFi players as brokers, subjecting them to the obligation to report user transactions, just like in the traditional finance sector. The action is one of several to shut tax loopholes and force compliance in the fast-growing cryptocurrency space.
Why Is Congress Resisting?
Politicians claim the rule is too broad and could kill innovation in the blockchain space. Among concerns are:
Privacy Concerns: Harvesting user data violates the founding premise of decentralization.
Overregulation: DeFi is not like centrally run brokers and so is subject to compliance headaches.
Industry Influence: More paperwork can push innovation abroad, derailing the American crypto sector.
What is next?
Though the committee’s motion indicates congressional pushback, it does not immediately repeal the rule. The matter can now move to wider legislative debate or lawsuits. In the meantime, crypto advocacy organizations keep pressing for clearer and more industry-friendly rules.
The Future of Crypto Taxation
The crypto taxation debate is far from being resolved. With advancing blockchain technology, regulators and lawmakers have to strike a balance between tax compliance and promoting innovation. The fate of this argument could decide the future of regulation for DeFi in the U.S. and elsewhere.
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