Radix Heartened by Signals From the U.S. Treasury | Miners & Stakers Won’t Face IRS Reporting Rule Requiring Digital-Asset Brokers to Turn Over Information on Clients’ Transactions

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Mining vs Staking
Mining vs Staking
Via The European Business Review

February 11, 2022, 3:11 PM PST
The crypto industry is celebrating the ruling including the broker definition clarity of today’s indication that the U.S.

Treasury Department plans to spare crypto miners and stakers from rules that would require digital-asset brokers to turn over information on their clients’ transactions to the IRS.

The decision, which was included in a letter sent to a group of senators Friday, is a big initial win for the industry in a battle that’s been brewing since last year when the reporting requirements were enacted as part of the bipartisan infrastructure bill. 

In the letter obtained by Bloomberg News, Treasury Assistant Secretary for Legislative Affairs Jonathan Davidson said the department’s view is that “ancillary parties who cannot get access to information that is useful to the IRS are not intended to be captured by the reporting requirements for brokers.” That language signals that people who use mining or staking to validate crypto transactions, as well as software and hardware providers, will be able to avoid the demands.

The broker tag is important because it will force firms to collect and disclose detailed information on customers, including names and addresses, gross proceeds from sales, and any capital gains or losses. The industry has argued that certain groups, such as miners and stakers, don’t have access to that kind of information, making compliance difficult — if not impossible — if they were swept in.

Treasury intends to issue proposed regulations in the future that reflect its thinking on the broker definition, Davidson said. The letter aligns the department’s views with comments that have been made by senators, including Virginia Democrat Mark Warner and Ohio Republican Rob Portman. 

U.S. Treasury Seal

Treasury’s clarification may help ease some of the concerns that have been raised by executives at crypto companies, like Block Inc. (formerly Square Inc.) and Coinbase Global Inc., and industry groups, such as the Blockchain Association and Coin Center. 

Several senators, including Warner and Portman, pushed to change the broker provision during the legislative process. An amendment seemed imminent when they reached a last-minute deal with the Biden administration, but the effort ultimately failed because it required the support of all 100 senators and Alabama Republican Richard Shelby objected because of an unrelated dispute over military spending. 

Since then, the pressure to clarify the reporting requirements has shifted to Treasury, which is tasked with interpreting the law through regulations. 

Davidson said there are other issues Treasury is still considering, including “the extent to which other parties in the digital asset market, such as centralized exchanges and those often described as decentralized exchanges and peer-to-peer exchanges, should be treated as brokers.”   

Senator Pat Toomey, the top Republican on the Senate Banking Committee who was involved in last year’s push to amend the infrastructure bill, said in an e-mailed statement Friday that he was encouraged by Treasury’s letter but still wanted lawmakers to pass legislation to codify the clarifications.  “This interpretation can always change, which is why Congress should act,” he said. 

Bloomberg News
By Allyson Versprille