• Latest
  • Trending
  • All
  • Industry
  • Compliance
  • Global Trade
  • Industry
  • Sustainability & Ethics
  • Video
  • Security & Risk
IRS-Issues-New-DeFi-Broker-Tax-Regulations

IRS Issues New DeFi Broker Tax Regulations

12/27/2024
EU and UK Agreement Set to Boost Trade and Ease Tariff Burdens Across the Supply Chain

EU and UK Agreement Set to Boost Trade and Ease Tariff Burdens Across the Supply Chain

06/05/2025
UK Rail Freight Expansion Strengthens Supply Chain Resilience and Lowers Tariff-Linked Costs

UK Rail Freight Expansion Strengthens Supply Chain Resilience and Lowers Tariff-Linked Costs

06/05/2025
London’s EV Congestion Charge Review Signals Policy Shift with Trade and Tariff Implications

London’s EV Congestion Charge Review Signals Policy Shift with Trade and Tariff Implications

06/05/2025
Global Air Cargo Alliance Led by Carriers from Qatar, UK, and Malaysia to Boost Trade Connectivity and Tariff Efficiency

Global Air Cargo Alliance Led by Carriers from Qatar, UK, and Malaysia to Boost Trade Connectivity and Tariff Efficiency

06/05/2025
Germany’s Hamburg Port Expands Shore Power to Cut Emissions and Prepare for Future Tariffs

Germany’s Hamburg Port Expands Shore Power to Cut Emissions and Prepare for Future Tariffs

06/05/2025
UK Temporarily Exempted from U.S. Metal Tariff Increase

UK Temporarily Exempted from U.S. Metal Tariff Increase

06/04/2025
Trump Pushes Tariff Hikes Amid Legal Obstacles

Trump Pushes Tariff Hikes Amid Legal Obstacles

06/04/2025
U.S. trade deal efforts challenged by tight deadlines and tariff issues.

U.S. trade deal efforts challenged by tight deadlines and tariff issues.

06/04/2025
OECD Cuts U.S. Growth Forecast Over Rising Trade Costs

OECD Cuts U.S. Growth Forecast Over Rising Trade Costs

06/04/2025
U.S. Steel and Aluminium Tariffs Raised to 50%

U.S. Steel and Aluminium Tariffs Raised to 50%

06/04/2025
Tariff Hikes on Steel and Aluminum to Raise Consumer Prices

Tariff Hikes on Steel and Aluminum to Raise Consumer Prices

06/03/2025
U.S. Tariffs Add Pressure to China and EU Trade Talks

U.S. Tariffs Add Pressure to China and EU Trade Talks

06/03/2025
supplychainreport
Saturday, June 7, 2025
  • Home
  • Industry
    • Supply Chain
    • Logistics & Transportation
    • Importing & Exporting
    • Manufacturing
    • Warehousing & Distribution
  • Compliance
    • Supply Chain Transparency
    • Anti-Money Laundering (AML)
    • Know Your Customer (KYC)
    • Risk Management
    • Export Controls
    • Sanctions
  • Global Trade
    • Market Trends
    • Economic Indicators
    • Sourcing
    • Trade Policies
    • International Relations
    • Trade Agreements
    • Tariffs & Duties
    • Import/Export Statistics
  • Luxury Goods
  • Industry
    • Blockchain in Supply Chain
    • Importing & Exporting
    • Automation & Robotics
    • Artificial Intelligence in Trade
    • Data & Analytics
  • Sustainability & Ethics
    • Green Supply Chains
    • Sustainable Logistics
    • Ethical Sourcing
    • Corporate Social Responsibility
    • Environmental Policies
  • Security & Risk
    • Cybersecurity in Trade
    • Fraud & Scams
    • Risk Mitigation
    • Security Protocols
    • Data Protection
  • ITC News
    • ITC Featured Members
    • ITC Business Councils Highlights
  • Events
    • Upcoming Conferences
    • Upcoming FREE Educational Webinars
No Result
View All Result
supplychainreport
No Result
View All Result

IRS Issues New DeFi Broker Tax Regulations

by Giezel Garcia
12/27/2024
in Compliance, Know Your Customer (KYC)

On December 27, 2024, the Internal Revenue Service (IRS) released new regulations governing the taxation of decentralized finance (DeFi) platforms, focusing on the application of broker rules. These regulations primarily affect DeFi trading platforms and are expected to bring significant changes to the sector.

Background on Broker Regulations

YOU MAY ALSO LIKE

Liberia’s Lonestar Cell MTN Mobile Money Fined for AML/CFT Compliance Failures

AI in Risk Management: Current Applications, Future Potential, and Limitations

The IRS’ existing rules under Section 6045 of the tax code require stock brokers to gather Know Your Customer (KYC) information, calculate gains and losses, and report the data to the IRS. This process is familiar to most taxpayers, who receive Form 1099-B from stock brokers detailing their annual gains and losses. Last year, the IRS extended these rules to custodial crypto brokers, including centralized finance (CeFi) exchanges. The newly released guidance clarifies how these broker rules will apply to DeFi platforms.

Three Layers of the DeFi Ecosystem

 The IRS has broken down the DeFi ecosystem into three layers:

  1. Interface Layer: This layer includes the user-facing components such as websites, mobile apps, and browser extensions that facilitate interaction with DeFi protocols.
  2. Application Layer: This is where users’ trade orders are executed and validated within the transaction process.
  3. Settlement Layer: The settlement layer records financial transactions on the distributed ledger, including trades conducted through DeFi protocols.

Interface Layer Classified as a Broker

The IRS has determined that only the Interface Layer, specifically “front-end trading services,” will be classified as brokers under the new regulations. These services are deemed to have the closest relationship with users and are therefore responsible for collecting KYC information and reporting relevant data to the IRS.

Impact on DeFi Platforms

DeFi platforms operating front-end services, such as websites, unhosted wallets, and browser extensions that allow users to exchange digital assets, will be required to comply with KYC requirements, track transactions, and report proceeds to the IRS. This will include issuing Form 1099-DA for transactions occurring after January 1, 2027. However, platforms will not be required to report cost basis information.

Note: Unhosted wallets that only manage private keys are not considered brokers under these rules.

Impact on DeFi Users

For users of front-end trading services, the new regulations will result in changes during the onboarding process, including the need to provide KYC information. Additionally, users can expect to receive tax forms that report proceeds from digital asset sales but will not include cost basis information. Users will still need to track cost basis and report accurate gains and losses independently, using crypto tax software or personal records.

Future Options for DeFi Platforms

In response to the new regulations, DeFi platforms may consider three possible paths:

  1. Compliance: Adhering to the new rules by implementing KYC processes and transaction reporting.
  2. Litigation: Challenging the regulations in court or awaiting potential repeal by a future administration.
  3. Relocation: Moving operations outside the United States, though this could bring its own regulatory challenges under international tax frameworks such as the crypto assets reporting framework (CARF) or the European Markets in Crypto-Assets Regulation (MiCA).

These new regulations mark a significant shift for the DeFi industry, aiming to enhance accountability and transparency while introducing new compliance challenges for both platforms and users. As the DeFi sector adapts to these changes, staying informed will be crucial.

Get comprehensive supply chain report news updates at The Supply Chain Report. For international trade tools, see ADAMftd.com.

#IRS #DeFi #CryptoTaxes #TaxRegulations #BrokerRules #FintechLaw #IRSUpdates

ShareTweet

Subscribe Our Newsletter

Share Your News

Whether it’s a groundbreaking achievement, a heartwarming tale, or an insightful perspective, we want to hear it. Share your news with us, and let’s amplify your voice in the digital symphony of stories.

Submit

A man is riding a bike on a hill.

The Supply Chain Report is your essential daily news website, serving as a trusted source for comprehensive coverage of the complex and ever-evolving global supply chain dynamics. Our expert team delves into the intricacies of international trade, manufacturing, logistics, importing, exporting, and supply chain management; providing in-depth analysis and up-to-date news on the latest trends, disruptions, and technological advancements affecting industries worldwide. From detailed reports on international trade through to insights into procurement strategies and inventory management, we offer valuable content that helps professionals stay informed and make knowledgeable decisions in a fast-paced market.

Each day, we bring you cutting-edge news and expert commentary that dissect significant international trade and supply chain issues Our coverage spans a wide array of sectors including manufacturing, retail, healthcare, food, consumer goods, and technology, ensuring that no matter your field, you have the strategic information needed to navigate the challenges and opportunities of today’s supply chain landscape. By synthesizing complex data and presenting actionable insights, The Supply Chain Report empowers business leaders, policymakers, and logistics professionals to optimize their operations and drive forward with confidence in an interconnected world.

Connect With Us

  • About
  • Events
  • Privacy Policy
  • Contact Us

© 2024 International Centre for Trade Transparency Limited. Incorporated in the United Kingdom.

No Result
View All Result
  • Home
  • Industry
    • Supply Chain
    • Logistics & Transportation
    • Importing & Exporting
    • Manufacturing
    • Warehousing & Distribution
  • Compliance
    • Supply Chain Transparency
    • Anti-Money Laundering (AML)
    • Know Your Customer (KYC)
    • Risk Management
    • Export Controls
    • Sanctions
  • Global Trade
    • Market Trends
    • Economic Indicators
    • Sourcing
    • Trade Policies
    • International Relations
    • Trade Agreements
    • Tariffs & Duties
    • Import/Export Statistics
  • Luxury Goods
  • Industry
    • Blockchain in Supply Chain
    • Importing & Exporting
    • Automation & Robotics
    • Artificial Intelligence in Trade
    • Data & Analytics
  • Sustainability & Ethics
    • Green Supply Chains
    • Sustainable Logistics
    • Ethical Sourcing
    • Corporate Social Responsibility
    • Environmental Policies
  • Security & Risk
    • Cybersecurity in Trade
    • Fraud & Scams
    • Risk Mitigation
    • Security Protocols
    • Data Protection
  • ITC News
    • ITC Featured Members
    • ITC Business Councils Highlights
  • Events
    • Upcoming Conferences
    • Upcoming FREE Educational Webinars

© 2024 International Centre for Trade Transparency Limited. Incorporated in the United Kingdom.