Cryptominers and stakers are exempted from rules that would require digital-asset brokers to report their clients’ transactions to the IRS, the Treasury Department announced according to Americanbanker.
In a letter sent on Friday to senators, the decision represents an important early victory for the industry in a long-running battle that started last year when the reporting requirements were enacted under the bipartisan infrastructure bill.
Bloomberg News obtained a letter from the Treasury Department’s Assistant Secretary for Legislative Affairs, Jonathan Davidson, which stated 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.”
This implies that the policy would not apply to anyone who uses mining or staking to validate crypto transactions, including software and hardware providers.
A broker tag is crucial for firms since it will require them to collect and disclose detailed customer information, including names and addresses, sales gross proceeds, and capital gains and losses.
Several groups, including miners and stakeholder groups, lack access to such information, making compliance challenging if they were affected.
To reflect Treasury’s thinking on the definition of a broker, Davidson said he intends to issue proposed regulations in the future.
According to the letter, the department’s views are in line with those expressed by senators, including Virginia Democrat Mark Warner and Ohio Republican Rob Portman.
Treasury’s clarification could help ease some of the concerns of executives at cryptocurrency companies such as Block Inc. (formerly Square Inc.) and Coinbase Global Inc. as well as industry organizations such as the Blockchain Association and Coin Center.
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Several senators pushed the broker provision was pushed to be changed by several senators, including Warner and Portman.
There was a last-minute deal between the Senate and the Biden administration that looked like it would lead to an amendment, but the effort failed as an amendment required all 100 senators’ support, and Alabama Republican Richard Shelby objected because of an unrelated dispute over military spending.
Treasury is responsible for interpreting the law through regulations, so it has been under pressure to clarify the reporting requirements since then.
Treasury is still considering other issues as well, such as “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.”
In an e-mail statement on Friday, Pat Toomey, chairman of the Senate Banking Committee and one of the leading Republicans involved in last year’s push to amend the infrastructure bill, said the Treasury letter was encouraging, but lawmakers must enact legislation codifying the clarifications.
“This interpretation can always change, which is why Congress should act,” he added.