Crypto Tax Chaos: Lawmakers Demand Urgent Overhaul for Treasury’s Proposed Rules!

Key Points:

• Public comment period for controversial tax proposal concludes.
• Lawmakers express concerns over broad definitions, insufficient clarity.
• Industry optimism as officials suggest the proposal may be “open for revision.”

U.S. lawmakers is intensifying efforts to prompt a revision of the Treasury’s proposed digital-assets taxation regime.

The group, led by Chairman of the House Financial Services Committee Patrick McHenry (R-NC) and Congressman Ritchie Torres (D-N.Y), comprises nine lawmakers advocating for changes in response to concerns raised by crypto representatives and legal experts. Critiquing the proposed taxation scheme as a “dangerous and improper overreach,” they specifically highlight the tax reporting requirement as “unworkable.”

In a public announcement on Wednesday, the lawmakers expressed apprehensions regarding the broad definition of a digital asset “Broker,” the insufficient definition of a “Digital Asset,” and an unreasonably short comment period. They argue that if the regulation is finalized, it could jeopardize a significant portion of the digital asset ecosystem in the United States. The announcement coincided with the release of a letter dated November 10, addressed to U.S. Treasury Department’s Assistant Secretary Lily Batchelder.

Crypto Community Outcries Over Tax Proposal!

The proposed crypto tax rule, introduced in August, recently concluded its public comment period after receiving over 124,000 comments. Lawmakers assert that the current version of the regulation poses a threat to the existence of various entities within the digital asset space. Despite concerns, there is a glimmer of hope for the industry, as officials hinted at the possibility of the tax proposal being “open for revision” during a recent audio-only hearing. A final version is anticipated in the coming months, with potential modifications addressing industry feedback.

A primary point of contention revolves around the proposal’s classification of hosted wallet providers, payment processors, decentralized finance (DeFi) entities, and others as “brokers” for tax reporting purposes. The lawmakers argue that the definition of a “Broker” is overly broad and could encompass entities that lack the traditional characteristics of a broker, further emphasizing the need for careful reconsideration of the proposed rules.

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