On 12/27, the IRS mandated that DeFi operators collect user data, sparking strong backlash from the industry. Related lawsuits officially began on 12/27, with renowned venture capital firm a16z fully supporting the legal action.
The IRS requires DeFi operators to collect user transaction data.
In August 2023, the IRS proposed a regulation targeting decentralized finance (DeFi) operators, requiring them to report user transaction information to the IRS to close tax loopholes.
According to IRS statistics, this regulation will affect about 650 to 875 DeFi platforms, as well as 2 million taxpayers in the United States. However, the industry argues that DeFi is characterized by decentralization and the absence of intermediaries, making it unreasonable and technically incoherent for the IRS to force operators to act as 'brokers'.
In August 2023, the IRS proposed new regulations for DeFi operators. The IRS pushed the new regulations late at night, drawing criticism from the industry for excessive regulation.
On the night of December 26 this year, the U.S. Treasury continued the IRS regulations from last August by adding new rules, requiring DeFi operators to collect and report user personal data and transaction records from their front-end services to the IRS, aiming to close the information gap related to crypto asset taxation and promote tax compliance. The news immediately sparked strong backlash from the industry, which considered this move a threat to American technological innovation and feared it would force related technologies out of the U.S.
a16z joins the fight, fully supporting DeFi operators in defending their rights.
Michele Korver, head of the crypto regulation department at the renowned venture capital firm a16z, also quickly expressed opposition to the new IRS regulations, stating that DeFi has the potential to make financial services more accessible and efficient, providing services centered around consumer demand. However, this new regulation poses a 'threat' to the development of DeFi.
Korver pointed out that the IRS's new regulations not only exceed their authority but also violate the Administrative Procedure Act (APA) and are completely unconstitutional. She also stated that she would fully support DeFi operators in suing the IRS.
a16z supports DeFi operators in filing a lawsuit against the IRS to protect their rights. The lawsuit has begun, and a coalition is challenging the IRS and the Treasury Department.
DeFi industry coalition formally filed a lawsuit against the U.S. Treasury, IRS, and Treasury Secretary Janet Yellen on 12/27. The lawsuit emphasizes that the operational model of DeFi is completely different from traditional finance, and the new regulations do not consider the technical characteristics of DeFi. If DeFi operators are forced to comply with the new regulations, it will lead to unnecessary legal issues and technical burdens, potentially destroying the entire industry.
The litigation team also called on the court to immediately revoke this regulation, stating that it represents overregulation. They promised the court that the industry would cooperate with Congress and the incoming Trump administration to promote the development of regulatory policies more aligned with DeFi characteristics.
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This article discusses how the IRS's late-night new regulations have triggered a DeFi crisis! DeFi operators unite to file a lawsuit to defend innovation, a16z: The Treasury has overstepped its authority. First appeared in Chain News ABMedia.