US Treasury, IRS propose cryptocurrency regulations for brokers

Regulation

Two federal agencies of the United States — the Department of the Treasury and the Internal Revenue Service (IRS) — have released a set of cryptocurrency regulations proposal detailing brokers’ reporting requirement.

The Office of Advocacy of the U.S. Small Business Administration revealed that the proposal around crypto regulations for brokers was released on Aug. 29, as it explained:

“The proposed rules would require digital asset brokers, including trading platforms, payment processors, and certain hosted wallet providers, to report gross proceeds for all sales or exchanges of digital assets starting on January 1, 2025.”

Brokers — referred to as “digital asset middlemen” in the regulatory proposal — will also be subject to providing information on gains and losses incurred during the sale of crypto assets. However, this requirement will kick in on or after Jan. 1, 2026.

Gross proceeds and basis reporting by brokers and determination of amount realized and basis for digital asset transactions. Source: Federal Register

According to a related document shared over the Federal Register, the proposed regulations are expected to deliver “higher levels of taxpayer compliance” as the IRS would get greater clarity on the income earned by taxpayers.

The Treasury Department and the IRS have invited small businesses in the U.S. to share how the regulations would impact them, which will be supported by a public hearing scheduled for Nov. 7, 2023.

Once signed into law, the regulations will require all brokers in the U.S. to file information returns with the IRS using the new Form 1099-DA and to provide payee statements to customers.

Related: US GAO explores blockchain for SBA’s small business programs oversight

The United States Government Accountability Office (GAO), a Congressional watchdog agency, released a 77-page report highlighting the need for stricter regulations around cryptocurrencies.

The report identified the spot markets for nonsecurity crypto assets as the center of a regulatory gap and stated:

“By designating a federal regulator to provide comprehensive federal oversight of spot markets for nonsecurity crypto assets, Congress could mitigate financial stability risks and better ensure that users of the platforms receive protections.”

On the other hand, traditional assets in that category enjoy robust regulation, the report noted.

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