Treasury recently delivered a mother lode of proposed tax reporting rules to the crypto industry.  By and large, the crypto industry is booing loudly, complaining that the rules are overbroad and that there is not enough time to implement reporting systems—January 1, 2025 (reporting of gross proceeds of digital asset sales) and January 1, 2026 (reporting of tax basis and character for digital asset sales).  On the other hand, Senator Warren (and others) are cheering loudly, urging an even faster timeline for implementing crypto tax reporting.

For the crypto industry, the one-to-two year deadline may be a non-starter given the complexity and girth of the 281 pages of proposed reporting rules.  Since publishing the proposed regulations, the IRS has received various commentaries from the crypto industry and associations.  The Blockchain Association and the Crypto Council for Innovation, both crypto focused policy groups, have submitted comments asking the IRS and Treasury to extend the public commentary period for the proposed regulations (available here and here, respectively). The Securities Industry and Financial Markets Association (“SIFMA”), a leading trade association for broker-dealers, has also requested an extension of this time period (available here).  Similarly, Coinbase argues that the timeline is too short and that the proposed rules are overbroad here.

This concern has not been shared by some members of Congress.  Senator Warren and others endorse the proposals, but urge an even shorter deadline for implementation.  On October 10, 2023, Senators Elizabeth Warren, Angus King, Richard Blumenthal, Bernie Sanders, Gary Peters, Sheldon Whitehouse, and Brian Schatz sent a letter (the “Letter”) to Treasury Secretary Janet Yellen and IRS Commissioner Danny Werfel.  The Letter complements the proposed regulations in the following aspects: the broker definition’s inclusion of persons who are in a position to obtain information (and not just those who have the information), the broad definition of digital asset, and the Treasury’s indication to issue further guidance under Section 6045A (transactions between brokers).  However, the Letter is highly critical of the proposed regulations’ two year delay and states that such delay runs counter to the original statutory directive of Section 6045 to apply the broker reporting rules to crypto transactions starting in 2024 (see our discussions of Treasury’s earlier postponements of the regulations here and here).

There you have it. Senator Warren and others are urging Treasury to move swiftly to implement these proposed rules, criticizing the proposed regulations self-imposed two-year delay.  The crypto industry largely disagrees with the criticisms addressed by the Letter, teeing up a potential standoff between Congress and the crypto industry. The realities of actual implementation may, over time, reveal who has the edge in this duel.