Consensys voices concerns over IRS proposed rulemaking for crypto

Blockchain company Consensys has urged careful consideration from the IRS regarding proposed crypto regulations, citing concerns over complexity and potential industry overhaul.

In a blog post on Dec. 21, Consensys, a blockchain software developer behind MetaMask and Infura, raised concerns over proposed IRS regulations for digital-asset brokers and emphasizing the need for precision and care in structuring reporting requirements.

In response to the proposed rulemaking, the blockchain company emphasized that the final regulations should “reflect the complexities of how digital-asset platforms work” as well as “ensure the continued development of the digital-asset industry.”

Consensys pointed out that the proposed regulations — if finalized as is — would impose a “new and complex regulatory scheme on software developers and others in a fast-growing industry with unique technical and operational features.”

“Software developers, from larger players such as Consensys to garage-band projects with a few engineers, would need to dramatically overhaul their business practices to come into compliance if the proposed amendments are finalized in their current form.”

Consensys

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MetaMask’s parent company also highlighted issues with the completeness of the analysis in the notice of proposed rule-making, stating that regulated parties may be unable to comply with the proposed amendments as formulated.

“In sum, the proposed amendments would impose unnecessarily high burdens on regulated parties, an overwhelming percentage of which are small businesses (as the proposed regulations expressly recognize) that would be acutely affected by regulatory burdens.”

Consensys

Consensys proposed a delay in implementation deadlines, suggesting a phased-in approach for particularly challenging aspects of the regulations.

The IRS introduced proposed regulations in late September, focusing on information reporting for specific crypto sales and exchanges. The primary objective of these regulations is to broaden existing reporting requirements to cover crypto transactions.

With the update, brokers would encounter new responsibilities under the proposed regulations, requiring them to submit information returns and furnish payee statements for designated crypto dispositions on behalf of their customers, which would require the introduction of a new IRS form.

The regulations are expected to take effect in 2026, with applicability to transactions in 2025, while specific provisions are set to become effective in 2027 for transactions occurring in 2026.

Read more: Nearly 50% of crypto investigations in 2022 involved tax issues, IRS says

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