Blockchain development firm Consensys sent a letter to the U.S. Internal Revenue Service requesting the delay of the proposed tax regulation requiring brokers and exchanges to report certain sales of cryptocurrencies.
“We must echo our overarching concern … that certain aspects of the regulations do not sufficiently consider the burden on the would-be broker, which currently includes entities that do not traditionally have any reporting obligations,” the letter said.
In April, the IRS published an early version of Form 1099-DA, which stems from tax reporting rules proposed last August that said crypto brokers would be treated similarly to traditional brokers for products such as stocks and bonds. Under the proposed rules, entities defined as brokers would need to file 1099-DA forms on behalf of customers in case of certain crypto transactions.
In the draft form, the tax agency lists types of brokers as kiosk operators, digital asset payment processors, hosted wallet providers, unhosted wallet providers, and others.
Consensys, the developer behind the MetaMask wallet, criticized the draft form for lacking clear instructions and being overly broad in its definition of a broker, potentially leading to multiple parties reporting the same transaction.
“For instance, the Draft Form has not been published with instructions for brokers, presenting an insurmountable challenge when asked to create a plan to implement the Draft Form,” Consensys said in the letter. “Said simply, it is unclear how to report in several boxes of the Draft Form.”
The blockchain firm also raised concerns about the proposed rules’ ability to address data privacy issues within the crypto industry. In addition to these concerns, Consensys pointed out that brokers face limited time to comply before the upcoming tax filing deadline.
“It cannot be more emphatically stated that providing software developers, now proposed to be brokers, with a form that requires manual inputs to complete would single-handedly destroy U.S. companies that publish blockchain user interfaces like self-custody wallets,” the letter added.
In an X post, Consensys’ senior counsel Bill Hughes encouraged other firms potentially affected by the tax form to comment on the regulation by Friday.
Previously, Ji Kim, chief legal and policy officer at the Crypto Council for Innovation, said on X that the IRS listing unhosted wallet providers as brokers was “unfortunate.”
“This fails to recognize, among other things, that a wallet provider, as a software tech provider, does not have knowledge of the nature of transactions processed, nor the identity of the parties to the transaction,” Kim said.
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