The United States Internal Revenue Service (IRS) issued new regulations targeting decentralized finance (DeFi) companies and their users.
According to the document published by the agency, DeFi companies will be required to collect and report detailed information about customers and their transactionsaligning with the tax obligations of traditional brokers.
IRS notes that DeFi platforms will have to file information returns and provide reports to beneficiaries on gross income derived from the sale or exchange of digital assets.
This requirement primarily applies to Form 1099-DA, which was created this year to supposedly increase tax transparency in the industry.
The US Treasury details that these rules will apply to “front-end service providers” that interact directly with users, such as website administrators that allow access to decentralized protocols. The regulation will come into force on January 1, 2027.
“Harmonizing tax requirements for digital assets will make filing easier for compliant taxpayers and help close the tax gap,” declared Aviva Aron-Dine, undersecretary for tax policy at the Treasury Department.
Impact on the DeFi ecosystem
The IRS announcement generates uncertainty in a sector that has historically operated under principles of pseudo-anonymity and decentralization.
Most DeFi protocols allow users to interact without identifying themselves, a model that now faces new regulatory demands.
Industry members expressed concern about how this regulation could affect innovation and competitiveness of the United States in the cryptocurrency industry.
Jake Chervinsky, chief legal officer at Variant, a venture capital firm focused on cryptocurrencies, rated the rule as “illegal” and noted that it is the “last gasp of the anti-cryptocurrency army on its way to leaving power.”
The specialist considers that the regulation must be overturned, either by the courts or by the incoming administration. By this he refers to the arrival of Donald Trump to power in January 2025, who has promised more flexible regulations for cryptocurrencies during his next government, as reported by CriptoNoticias.
Additionally, organizations such as the Blockchain Association and the Texas Blockchain Council filed lawsuits legal against the measure.
They argue that the regulation exceeds the legal authority of the IRS and violates the Administrative Procedure Act, in addition to considering it a threat to the privacy of users.
Possible long-term effects
The cryptocurrency industry fears that these rules will force decentralized technology companies and developers to relocate outside the United States.
According to Marisa Coppel, Director of Legal Affairs at the Blockchain Association, These types of regulations could discourage innovators from operating in the countryaffecting the global competitiveness of the United States in the cryptocurrency industry.
In contrast, The government maintains that the measure promotes greater tax equity and provides taxpayers with tools to comply with their legal obligations.
The new IRS regulations represents a turning point in the relationship between the US government and decentralized finance. Although it seeks to increase fiscal transparency and close the gap in unreported income, it faces criticism for its possible effects on innovation, privacy and the competitiveness of the sector.
