I was going to write about spending a few hours at Costco, but fortunately, perhaps for all of us, there are more important things going on in the cryptocurrency and regulatory space. For example, we just passed the first comment period on an IRS proposal to classify certain types of cryptocurrency as broker-dealers for tax reporting purposes. A public hearing will be held today (and tomorrow) to consider these comments, although the comment period has been extended for several weeks.
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Story
We are approaching the deadline for comments on the IRS's proposed rule on broker-dealer reporting requirements for crypto-entities and certain types of transactions.
Because it matters
The US Treasury Department and the IRS will implement new tax reporting rules for cryptocurrencies. The crypto industry as a whole seems to be against it. Most of the comments I've read call for caution or express concerns about the written proposal, while few support it.
break up
A few months ago, the US Treasury Department issued a highly anticipated rule aimed at enforcing broker-dealer reporting standards for cryptocurrency companies. The proposal proposed using hosting wallet providers, payment processors, and certain decentralized finance (DeFi) institutions as “broker-dealers,” meaning these groups would be subject to special requirements. Treasury also opened a public comment period, inviting comments on the general rule and asking specific questions about various provisions detailed in the document.
As of November 6, more than 117,000 comments had been received, of which fewer than 40,000 had been posted online (apparently posted when Treasury officials read them).
I've read... several. I can't really estimate the number because I shut down a lot of duplicates pretty quickly and at some point started filtering out the anonymous ones (many of which overlapped with the main topics covered below). Let's say more than a few, less than most and nowhere near 40,000.
In the limited number of comments I read, several important issues emerged: privacy implications, robust transaction reporting requirements, collection burdens on intermediaries, and the potential for DeFi applications to impose requirements beyond those set forth in the proposal. All of these questions in turn addressed what several commenters described as an overwhelming amount of information that must be collected and reported.
The main problem is that DeFi platforms cannot be configured to collect personally identifiable information (PII) from parties transacting on these platforms, nor can they be easily configured to encourage people to continue using these platforms. .
Some commentators suggest that accounting for stablecoin transactions also significantly increases the amount of data that platforms may need to collect and report.
In the proposed rules, Treasury noted that stablecoins would not currently be excluded from the rule's sale provisions, but asked for comment on whether stablecoins should be excluded if the sale would not result in a gain or loss. as well as other aspects of this part of the sentence.
Some commenters seemed concerned about the need to report small transactions, such as buying a cup of coffee. As far as I know, US citizens should already be informed of these transactions, but the problem may lie in how they are reported and who collects and publishes the data. More on this below.
The privacy implications described are also divided into two groups. One group suggested that because some people have assets, their personal information, including addresses, could be more easily exposed, putting them directly at risk. It's worth noting that while providers of hosted wallets (presumably meaning entities that develop and sell or license software to third parties for non-hosted wallets) may have interim reporting requirements, users of hosted wallets don't just have actual tax reporting. obligations. It's entirely possible that the tax form we share is missing some detail, but if you file a tax return, you must provide your address to the IRS.
There is also the fear that the brokers themselves (such as a centralized or decentralized platform) could be compromised, which, yes, is fair enough.
Another group, and I'm reading between the lines a bit, suggested that in part, cryptocurrency transactions below a certain level (dare I say "de minimis?") should simply be exempt from disclosure requirements. although that is not the question the proposed rule raises.
A smaller sub-topic was the expansion requests submitted by various companies and organizations in the cryptocurrency industry. The Treasury extended the comment period by two weeks and postponed the public hearing until November 13. Individuals who wish to participate in the hearing must send a letter to the IRS with the subject line “REG-122793-19 Request to Participate in Telephone Hearing” by Nov. 9, according to Federal Register instructions.
Some comments were off topic. Some seem to have made clichéd comments about Pulsechain or defended Richard Hart, the face of the project, who is currently being sued by the Securities and Exchange Commission. Another called Hart a "fraudster" and called on the federal government to crack down on everything but bitcoin. I'm going to do something a little unusual and give my personal opinion here. Maybe sending IRS comments to the SEC (I think?) is a waste of everyone's time.
One commenter ignored the proposed rule itself, I'm mainly complaining about the Federal Register search feature because it pissed me off Monday night when I turned it on [redacted].
Also, neither here nor there, the Rules.gov website where these comments were posted was down intermittently from Monday evening to Tuesday morning.
As some of you may have noticed, Sam Bankman-Fried was indicted last week on seven separate counts related to the operation and collapse of his cryptocurrency exchange FTX and his trading firm Alameda Research. The decision comes on the anniversary of CoinDesk's Ian Allison publishing Alameda's balance sheet and Binance's Changpeng "CZ" Zhao threatening to dump the company's entire FTT stack. from the exchange, which in turn accelerated withdrawal requests and eventually led to the failure of FTX. November 11, 2022
Apparently, I (and about 20 or 30 other reporters) spent a lot of time covering this trial in October in a federal courthouse in downtown Manhattan, and the conclusion seemed as unexpected as it was inevitable. Read all about the CoinDesk trial here, and feel free to send comments or questions by replying to this email. at or sbftrial@coindesk.com.
Monday
Tuesday
- Genesis' ongoing bankruptcy hearing will be held at 7:00 PM UTC (2:00 PM EST. EST). Topics of discussion include a proposed disclosure statement and legal action against Digital Currency Group, Genesis and CoinDesk's parent company.
wednesday
- 23:00 UTC (18:00 EST). If you're in New York and want to chat with CoinDesk's litigation team (including yours truly) about our five-week coverage of the Sam Bankman-Fried trial, join us at PubKey in Manhattan. . It's going to be killer.
Thursday
- 15:30 UTC (10:30 EST) The Senate Banking Committee will hold a confidential members-only briefing on illegal financing.
- ( The New York Times ) The Times spoke to several people who have been turned down by banks in recent years. Just as interesting as the report itself is the fact that JP Morgan Chase authorized a representative to discuss some of these cases (apparently with the permission of former clients).
- ( Bloomberg ) This is an interesting portrait of some of the prosecutors who prosecuted Sam Bankman-Fried.
- ( Protos ) Cryptocurrency think tank Coin Center has lost a Tornado Cash lawsuit against the Treasury and its Office of Foreign Assets Control. A Treasury statement attributed to Deputy Secretary of State Brian Nelson said the agency was "pleased" and added: “Our sanctions tools are critical in combating terrorist financing and weapons proliferation, whether through the traditional financial system or the virtual currency ecosystem. ".CC's Neeraj Agrawal tweeted that the organization is considering an appeal.
- ( The Verge ) So the titular bored monkey appears to have developed photokeratitis and sunburn from UV exposure at an event in Hong Kong. For some reason, this isn't the first time something like this has happened.
- ( FinCEN ) The Financial Crimes Enforcement Network held a "public-private conversation" regarding cybersecurity related to terrorist financing, including cryptocurrencies and their use in terrorist attacks. The press release was about attacks against Hamas and Israel.
If you have ideas or questions about what I should discuss next week, or any other comments you'd like to share, please email me at
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See you next Tuesday.
This story originally appeared on Coindesk.