CoinVoice has recently learned that the U.S. Internal Revenue Service (IRS) has classified DeFi front ends as brokers under its reporting rules, which has sent shockwaves through the crypto industry. It is reported that the U.S. Treasury and IRS received over 44,000 comments following the proposal of this rule.
Galaxy Digital Research Director Alex Thorn outlined three potential options for DeFi if the IRS rules are not rescinded. He indicated that DeFi services and applications could comply with IRS reporting requirements and accept broker designations, attempt to block users from the U.S., or forgo smart contract upgrades and revenue generation.
Thorn wrote: 'According to the proposal, DeFi applications with no front-end website, possessing non-upgradable contracts, and not charging any 'consideration' (i.e., not charging any fees) during the disposal of digital assets can be exempt from being designated as 'brokers'. In other words, highly decentralized applications are unable to understand the situation and therefore cannot comply with broker reporting requirements.' [Original link]