This article:IRS rules require DeFi platforms to act as brokers and report transactions
DeFi platforms can choose to follow the rules, block U. S. users or decentralize completely. Each option has its own challenges affecting privacy, growth and innovation Under new IRS rules, #DeFi platforms will be classified as brokers requiring KYC and transaction reporting. services will have to choose between following the rules, blocking U. S. users or fully decentralizing. Each of these paths comes with risks and could have a significant impact on the future of decentralized finance.
the U. S. IRS recently published reporting rules that could impact the decentralized finance (DeFi) sector. Under the rules, DeFi platforms and front-ends are classified as brokers and must report complex transactions and user information.
The final IRS reporting rules, published on December 27, 2024, expand the definition of "broker" to include DeFi. This now includes an external platform. It goes without saying that platforms such as Uniswap, which allows users to buy and sell digital assets through #smart contracts, will eventually have to comply with KYC rules and report user transaction data.
These rules are a significant step forward as most DeFi apps At the core of DeFi apps are decentralized and privacy driven, which presents a very serious challenge for DeFi apps. These rules could stifle innovation and force platforms to move overseas, which goes against the fundamental principles of the #cryptocurrency world.
With the deadline approaching, the industry must decide how to adapt to these rules. Galaxy Digital's head of research Alex Thorne, head of research at Galaxy Digital, outlined three possible paths if the IRS rules are not repealed.
The first option for the DeFi platform is to comply with the new IRS regulations. This includes implementing KYC protocols, collecting user data, and reporting transactions to the IRS.
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