Oppose the new requirement for Decentralized Finance operators to report customer data! The '3 major encryption groups' jointly sue the US Tax Authority

3 cryptocurrency industry groups, including the Decentralized Finance Education Fund, The Blockchain Association, and the Texas Blockchain CouncilIt is suing the IRS for new rules that would prevent the IRS from requiring Decentralized Finance operators or institutions to return customer data.

Earlier, the US Congressional Budget Office has finalized the Cryptocurrency tax regulatory provisions as part of the Biden administration's "Infrastructure Investment and Employment Act." The IRS said that these new rules should help "narrow the information gap" on digital assets.

These regulations include the requirement for Decentralized Finance brokers to provide customers with Form 1099-DA, which contains key details of cryptocurrency transactions, such as names, wallet addresses, and transaction amounts. This positions Decentralized Finance service providers in the same tax reporting obligations as traditional securities brokers. In addition, the regulations also require brokers responsible for recording total earnings into customer wallet addresses or accounts to report the transaction.

These controversial regulations are expected to take effect in 2027, when some Decentralized Finance front-end operators will be required to collect users' personal information and transaction history.

However, three encryption industry associations have filed a lawsuit against the US Internal Revenue Service, arguing that the above approach would excessively burden the 'Decentralized Finance trading front-end'. Essentially, these trading front-ends are online platforms that allow users to use Cryptocurrency protocols, but they do not necessarily constitute 'substantive transactions'. The lawsuit points out:

Compared to traditional finance, Decentralized Finance does not rely on intermediaries such as brokers. Users are responsible for the custody of digital assets themselves and trade with each other using software.

The lawsuit argues against defining these trading front-ends as brokers, in part because "there are simply no entities like brokers among the participants in Decentralized Finance transactions."

Marisa Coppel, legal leader of the Block Chain Association, said in a statement that the new regulations "infringe on the privacy rights of individuals using Decentralization technology" and will also push this emerging technology overseas.

This lawsuit argues that the essence of Decentralized Finance should be exempt from reporting requirements and that implementing new regulations would be an act of exceeding authority, potentially 'effectively terminating the Decentralized Finance industry'.

Texas Block Chain Committee Chairman Lee Bratcher said:

This regulation carries the risk of driving funds to flow overseas, threatening the competitiveness of the United States in the digital economy.

According to the Internal Revenue Service's own estimate, the provision could affect 'approximately 650 to 875 decentralized finance brokers, with a median of about 765 decentralized finance brokers.' The IRS also roughly estimates that the new provision will affect approximately 2 million U.S. taxpayers.

〈Opposition to New Regulations: Decentralized Finance Operators Required to Report Customer Data! '3 Major encryption Groups' Jointly Sue the US Tax Authority〉This article was first published in "Block Guest".