This
op-ed
is
part
of
CoinDesk’s
Tax
Week,
presented
by
TaxBit.
Matan
Doyich
is
the
co-founder
and
CEO
of
Crypto
Index.
Far
from
being
just
another
set
of
rules,
the
Internal
Revenue
Service’s
(IRS)
proposed
“broker
rule”
aims
to
establish
an
overarching
taxation
framework
for
digital
assets.
It’s
also
become
a
rallying
cry
for
crypto
leaders
to
unite
against
what
many
perceive
as
a
potential
encroachment
on
privacy
rights,
innovation
and
a
departure
from
crypto’s
decentralized
foundations.
Does
this
sound
familiar?
With
the
Security
and
Exchange
Commission
mulling
its
own
comprehensive
crypto
regulations
—
looking
to
fill
a
regulatory
gap
by
bringing
digital
asset
exchanges
under
their
purview
—
the
IRS
proposal
could
serve
as
the
perfect
test
for
how
the
industry
rallies
together
and
uses
its
combined
strength
to
offset
crippling
government
overreach.
Sliding
into
the
abyss
The
Blockchain
Association,
a
lobbying
group
based
in
Washington
D.C.,
issued
a
scathing
response
to
the
IRS,
stating
that
the
proposed
rules
not
only
exceed
the
government’s
authority
but
also
reveal
a
fundamental
lack
of
understanding
of
digital
assets
and
decentralized
technology.
Such
shortcomings
may
unleash
a
cascade
of
unintended
consequences,
negatively
impacting
the
very
core
of
the
crypto
ethos.
Others
have
sounded
alarms
about
the
regulations
threatening
a
nascent
industry
before
it
can
truly
get
off
the
ground,
setting
a
dangerous
precedent
of
surveillance.
At
the
heart
of
the
industry
pushback
is
a
shared
concern
for
privacy
rights
and
the
preservation
of
the
founding
principles
that
helped
shape
crypto
into
an
attractive
and
diverse
user
base.
Expanding
the
definition
of
“brokers”
is
seen
as
a
potential
privacy
infringement
as
it
broadens
the
scope
to
include
participants
such
as
decentralized
finance
(DeFi)
developers,
who
may
not
have
traditional
access
to
customer
information.
This
extension
raises
serious
concerns
about
unnecessary
reporting
requirements
that
could
compromise
individual
privacy,
especially
within
the
context
of
DeFi
where
privacy
and
anonymity
are
key
tenets.
The
clash
between
these
regulations
and
DeFi’s
pseudonymous,
decentralized
features
also
potentially
leads
to
stifled
innovation
and
collapsing
underlying
technologies
due
to
impractical
regulatory
constraints.
The
signs
here
are
ominous:
“It
will
drive
U.S.-based
decentralized
projects
abroad
or
out
of
existence,
full
stop,”
claims
a
senior
counsel
at
the
Blockchain
Association.
Is
time
running
out?
A
rallying
call
spurred
by
the
proposed
regulations
extends
beyond
opposition
—
it
is
a
call
to
action
for
crypto
leaders
to
actively
participate
in
the
shaping
of
their
regulatory
frameworks.
While
the
regulations
may
pose
challenges,
they
have
also
ignited
a
spark
within
the
industry
to
proactively
engage
with
policymakers,
advocating
for
sensible
and
fair
regulatory
measures
that
foster
innovation
rather
than
stifling
it.
See
also:
The
IRS
Should
Heed
This
Warning
|
Tax
Week
2023
The
proposed
tax
rule
was
open
for
74
days
of
public
comment
and
garnered
over
124,000
public
comments
in
that
span.
As
it
now
moves
to
consideration
and
discussion,
the
time
for
action
cannot
be
stressed
enough.
Leaders
buoyed
by
the
crypto
industry’s
substantial
political
influence
—
reflected
in
a
$21.6
million
federal
lobbying
spending
in
2022
—
can
strategically
unite.
By
pooling
resources,
they
can
amplify
their
collective
strength
to
engage
in
a
targeted
approach
with
regulators
by
conducting
educational
campaigns
and
encouraging
open
dialogues.
This
united
front
aims
to
navigate
regulatory
challenges
effectively,
ensuring
that
regulations
accommodate
the
distinctive
features
of
the
crypto
space,
promote
innovation
and
safeguard
privacy
rights.
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does
not
share
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editorial
content
or
opinions
contained
within
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and
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on
or
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endorse
any
individual
opinions.