The IRS mandated on 12/27 that DeFi operators must collect user data, triggering strong backlash from the industry. Related lawsuits officially commenced on 12/27, with prominent venture capital firm a16z fully supporting the lawsuit.
The IRS requires DeFi operators to collect user transaction data.
The IRS proposed a regulation in August 2023 requiring DeFi operators to report user transaction information to the IRS to close tax loopholes.
According to IRS statistics, this regulation will affect approximately 650 to 875 DeFi platforms and 2 million taxpayers in the U.S. However, the industry believes that DeFi is fundamentally decentralized and lacks intermediaries. The IRS's requirement for operators to act as 'brokers' is both unreasonable and technically infeasible.
The IRS proposed new regulations for DeFi operators in August 2023. The IRS pushed these new regulations late at night, and the industry criticized the excessive regulation.
On the night of December 26, the U.S. Treasury Department extended the IRS regulations from last August by adding new rules requiring DeFi operators to collect and report user personal information and transaction records from their front-end services to the IRS. This aims to close information gaps related to crypto asset taxation and promote tax compliance. The news immediately sparked strong backlash from the industry, which believes this move threatens U.S. technological innovation and could force relevant technologies out of the country.
a16z joins the battle, fully supporting DeFi operators in defending their rights.
The head of a16z's crypto regulatory division, Michele Korver, quickly expressed opposition to the IRS's new regulations, stating that DeFi has the potential to make financial services more accessible, efficient, and consumer-focused. However, this new regulation poses a 'threat' to the development of DeFi.
Korver pointed out that the IRS's new regulations not only exceed its authority but also violate the Administrative Procedure Act (APA) and are completely unconstitutional, while also pledging full support for DeFi operators in their lawsuit against the IRS.
a16z supports DeFi operators in suing the IRS to protect their rights. The lawsuit has begun, with a coalition challenging the IRS and the Treasury Department.
DeFi industry coalitions formally sued the U.S. Treasury Department, 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 urged the court to immediately rescind this regulation, stating that it constitutes excessive regulation. They promised the court that the industry would collaborate with Congress and the new Trump administration to promote regulatory policies more aligned with the characteristics of DeFi.
(IRS reignites cryptocurrency controversy: Should staking income be taxed? POSA calls to 'stop sowing seeds of chaos')
This article discusses how the IRS's late-night new regulations have triggered a DeFi crisis! DeFi operators unite to sue to defend innovation, a16z: The Treasury Department has overstepped its authority. First appeared in Chain News ABMedia.