The Blockchain Association is once again contesting the Internal Revenue Service’s (IRS) proposed broker-dealer regulations, emphasizing the excessive burden these rules would place on investors, cryptocurrency enterprises, and the IRS itself.

In a formal letter, the industry advocacy group invoked the Paperwork Reduction Act, which mandates that government agencies should not encumber individuals and entities in the financial system with superfluous and convoluted paperwork obligations.

Representatives from the Blockchain Association contended that implementing these proposed regulations would result in the processing of an additional 8 billion 1099-DA tax forms, squandering 4 billion labor hours, and incurring an annual compliance cost of $254 billion.

The Initial Objection Letter from the Blockchain Association

In 2023, the Blockchain Association drafted a comprehensive 39-page letter to the IRS, meticulously outlining a series of objections to the agency’s proposed broker regulations. The advocacy group characterized the IRS’s proposed broker reporting rule as an instance of governmental overreach, explaining that certain entities within the blockchain sphere, particularly decentralized finance (DeFi) protocols, would find compliance nearly impossible.

The letter ultimately underscored “fundamental misunderstandings” regarding cryptocurrencies, digital assets, and decentralized finance on the part of U.S. government officials, who struggle to comprehend the paradigm shift introduced by blockchain technology.

Widespread Discontent within the Crypto Community

The IRS’s proposed tax rules and reporting criteria have ignited significant backlash within the crypto community, with numerous individuals and institutions expressing strong disapproval of the regulations’ outdated requirements.

Jerry Brito, executive director at Coin Center, echoed the objections laid out in the Blockchain Association’s original letter, highlighting the logistical challenges of imposing such reporting requirements on decentralized networks and their participants.