The Blockchain Association has officially sued the U.S. Internal Revenue Service (IRS), accusing the new regulation on reporting digital asset transactions of violating existing law and creating an unnecessary burden on technology developers.
The lawsuit was filed immediately after December 27 when the IRS issued regulations requiring brokers, including decentralized exchange (DEX) platforms, to provide detailed information about cryptocurrency transactions, starting from 2027. This regulation significantly expands the scope of reporting, including information about taxpayers, while raising concerns about the invasion of DeFi users' privacy and increasing compliance obligations for software developers.
According to the regulation, any DeFi platform that supports the trading or exchange of digital assets, even through smart contracts, if it has certain control, is considered a broker. The Blockchain Association argues that this regulation creates an unreasonable compliance burden on trading infrastructure developers while warning that expanding the definition of brokers to include DeFi interfaces that do not directly execute trades is a misguided step that threatens user privacy.
Source: Kristin Smith
Marisa Coppel, Head of the Legal Department of the Blockchain Association, stated: “This not only pushes DeFi technology out of the borders of the U.S. but also severely harms innovation in the decentralized finance sector.” She emphasized that the Association will firmly fight to protect the interests of the technology sector and the community using DeFi.
Kristin Smith, Executive Director of the Blockchain Association, stated on platform X that the IRS's new regulation violates the Administrative Procedure Act and the U.S. Constitution. This move comes amid concerns from many legal experts about the negative impact of the regulation on privacy.
It is estimated that the new regulation could directly affect 650-875 DeFi brokers and approximately 2.6 million taxpayers in the U.S. Brokers will have to start collecting digital asset transaction data from 2026 to meet reporting requirements by 2027.