This
op-ed
is
part
of
CoinDesk’s
Tax
Week,
presented
by
TaxBit.
Kristin
Smith
is
CEO
of
Blockchain
Association.
Miller
Whitehouse-Levine
is
CEO
of
the
DeFi
Education
Fund.
The
long-running
scramble
for
control
between
America’s
administrative
agencies
and
our
elected
representatives
passed
another
important
milestone
this
week.
As
the
U.S.
Treasury
Department
prepares
to
finalize
a
new,
expanded
definition
of
who
it
considers
to
be
a
“broker”
subject
to
tax
reporting
obligations,
Congress
has
yet
another
opportunity
to
show
renewed
vigor
in
its
efforts
to
set
clearer
rules
across
many
aspects
of
our
lives
touched
by
regulation,
and
reign
in
the
metastasizing
power
of
administrative
agencies.
While
the
broker
issue
may
seem
narrow
and
important
only
to
the
digital
assets
industry
which
it
targets,
the
process
from
which
the
new
definition
arose
illuminates
the
imbalance
between
the
power
assumed
by
regulatory
agencies
and
Congress’s
role
to
set
limits
on
such
power.
As
recent
court
rulings
have
shown,
on
issues
such
as
regulating
greenhouse
gas
emissions
and
student
loan
forgiveness,
our
legal
system
is
putting
the
ball
squarely
back
in
Congress’
court
with
a
tacit
message:
the
power
to
answer
these
tough
questions
lies
with
our
elected
lawmakers.
The
broker
issue,
in
particular,
demonstrates
the
unfortunate
outcomes
of
limited
checks
on
the
power
of
federal
agencies
to
interpret
statutory
language
set
by
Congress.
Infrastructure
Act
fallout
In
the
summer
of
2021,
while
Congress
debated
the
bipartisan
Infrastructure
Investment
and
Jobs
Act,
there
was
one
issue
that
riled
the
entire
crypto
industry,
and
almost
stopped
the
legislation
in
its
tracks:
how
the
bill’s
language
defined
a
“broker”
for
digital
assets-related
tax
information
collecting
and
reporting
purposes.
At
the
time,
many
in
the
industry
warned
that
the
bill’s
definition
was
overly
broad
and
would
sweep
up
people
not
actually
engaged
in
any
broker-like
activity,
including
software
developers,
and
force
them
to
not
just
furnish
information
they
would
otherwise
collect,
but
also
to
proactively
collect
that
information
from
people
with
whom
they
have
no
relationship.
Several
Senators,
including
the
primary
sponsors
of
the
legislative
package,
agreed
with
this
interpretation,
though
their
legislative
fix
was
not
considered
because
amendments
to
the
broader
bill
would
have
slowed
its
enactment.
And
thus,
the
future
viability
of
the
digital
asset
economy
in
the
United
States
was
delivered
into
the
hands
of
the
Treasury
Department,
with
the
hope
that
the
IRS
would
interpret
the
definition
as
Congress
meant
it
and
leave
out
the
breadth
of
entities
that
Congress
did
not
explicitly
intend
to
capture.
That
hope
was
misplaced.
If
the
broker
rule
proceeds
as
is,
it
will
surely
spell
the
near-total
collapse
of
the
crypto
industry
in
the
United
States.
Fast
forward
two
years
and
fears
about
the
broker
definition
have
come
true.
It’s
clear
that
the
Treasury
decided
to
broaden
the
scope
of
what
it
deems
a
broker
irrespective
of
the
statutory
language
set
by
Congress.
While
there
are
many
in
the
digital
assets
industry
that
do
fit
the
natural
and
traditional
understanding
of
the
term
“broker,”
such
as
centralized,
custodial
exchanges,
it
is
obvious
that
others,
such
as
decentralized
finance
(DeFi)
software
developers
and
non-custodial
wallet
software
providers,
shouldn’t
be
swept
up
by
this
definition.
For
instance,
under
the
new
definition
a
broker’s
“reporting”
requirement
becomes,
explicitly,
a
collection
and
reporting
requirement
because
it
includes
“those
in
a
position
to
know”
information
about
other
people
(without
explaining
what
“being
in
a
position
to
know”
actually
means
in
practice).
This
contortion
of
the
statutory
language
set
by
Congress
gives
the
IRS
a
comically
wide
brush
to
paint
any
number
of
persons
and
entities
as
“brokers.”
See
also:
Coin
Center
on
the
Proposed
IRS
Broker
Rules |
Tax
Week
2023
Under
this
perspective,
who
isn’t
a
broker?
As
the
comment
period
for
the
rulemaking
closed
this
week,
more
than
120,000
letters
had
been
submitted,
a
staggering
amount
demonstrating
the
real
impact
the
application
of
this
updated
definition
would
have
for
real
people.
Broad
interpretation
This
type
of
broad
interpretation
of
powers
at
regulatory
agencies
happens
often.
In
some
cases,
it
is
understandable
to
rely
on
the
expertise
of
agency
staffers
to
design
and
implement
complex
rulemakings
to
address
subject
matter
issues.
In
other
cases,
these
agencies
have
been
deemed
to
have
exceeded
the
power
set
to
them
by
Congress.
The
courts
have
agreed
with
the
latter
sentiment
in
several
recent
high
profile
cases,
including
decisions
to
limit
the
power
of
the
Environmental
Protection
Agency
(EPA)
to
regulate
some
sources
of
greenhouse
gas
emissions
and
the
ability
of
the
federal
government
to
forgive
a
meaningful
amount
of
outstanding
student
loan
debt.
While
many
conservatives
have
cheered
these
decisions,
it
stands
to
reason,
with
a
different
Supreme
Court
makeup
and
later
Democratic
presidents,
that
there
will
be
future
decisions
on
regulatory
power
that
will
displease
those
same
people.
The
issue
is
that
executive
orders,
guidance
documents
and
rulemakings
might
reflect
the
current
administration’s
priorities
but
that
none
can
actually
change
the
laws
on
the
books,
leading
to
endless
rounds
of
disputes
and
protracted
litigation.
Tit
for
tat
governance
creates
whipsawing
national
policy,
undermining
the
rule
of
law
and
continually
raising
the
stakes
of
each
presidential
election.
No
small-d
democrat
should
want
to
see
this
dynamic
continue.
In
the
instance
of
the
broker
definition,
the
issue
is
stark:
Congress
continues
to
try
to
fix
the
issue
—
including
Rep.
Patrick
McHenry’s
Keep
Innovation
in
America
Act,
a
bill
that
aims
to
narrow
and
refine
the
definition
of
a
broker
—
while
the
Treasury
Department
seems
intent
on
ignoring
those
aims.
This
is
simply
undemocratic,
subverting
the
will
of
our
elected
representatives,
and
causing
unnecessary
harm
to
the
growing
digital
assets
economy.
If
the
broker
rule
proceeds
as
is,
it
will
surely
spell
the
near-total
collapse
of
the
crypto
industry
in
the
United
States.
The
issue
of
how
to
define
a
broker
may
seem
small
in
the
larger
scheme
of
fights
between
Congress
and
the
administrative
state,
but
the
battle
lines
on
this
issue
make
clear
the
stakes:
who
is
the
ultimate
arbiter
of
how
our
society
is
governed?
Congress
should
wrest
back
the
initiative
from
federal
regulators
and
tip
the
rulemaking
balance
back
to
democratic
control.
CoinDesk
does
not
share
the
editorial
content
or
opinions
contained
within
the
package
before
publication
and
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sponsor
does
not
sign
off
on
or
inherently
endorse
any
individual
opinions.