The Proposed IRS Broker Reporting Rules Would Effectively Kill DeFi

The IRS’s latest crusade into the realm of digital assets threatens to redefine the landscape of decentralized finance (DeFi) with its proposed broker reporting rules.

Historically, brokers in the traditional finance (TradFi) sector are obligated to issue 1099 forms detailing an individual’s gains and losses, requiring knowledge of personal details for tax purposes. This model fits neatly within the TradFi framework, where transaction data is centralized.

However, as we pivot to the digital asset world, this model becomes increasingly problematic.

Explanation of new 1099-DA tax form

The introduction of the 1099-DA form, crypto’s equivalent to the traditional 1099, symbolizes an attempt to tether the wild expanse of crypto transactions to the IRS’s tax scaffolding.