The U.S. Congress is planning to introduce legislation that would impose new requirements on cryptocurrency brokers to report on the income of their customers to the Internal Revenue Service (IRS), according to a report by The Block.
The legislation, which is still in the early stages of development, would build on the existing reporting requirements for cryptocurrency exchanges, which are already required to report on transactions over $10,000 to the government. However, the new legislation would go further, requiring brokers to report on the net income of their customers, similar to the way that banks and other financial institutions report on the interest income of their customers.
The move comes as the IRS is struggling to keep pace with the rapid growth of the cryptocurrency industry. According to the agency’s own estimates, less than half of taxpayers who have cryptocurrency income are reporting it to the IRS. This is despite the fact that cryptocurrency gains are subject to capital gains tax rates, which can be substantial.
The Block’s report did not name the lawmakers involved in drafting the legislation or the specific House and Senate bills that it would be folded into.
According to the report, the House Ways and Means Committee and the Senate Finance Committee are both considering new legislation to expand the reporting requirements on digital asset platforms. The legislation would also likely include provisions to provide taxpayers with more guidance on how to comply with the new rules.
The move to expand the reporting requirements on cryptocurrency brokers is likely to be controversial. Some industry groups have argued that the existing reporting requirements are already a significant burden on exchanges and could lead to increased compliance errors. They also worry that the new legislation could subject a broad swathe of Web3 services to reporting obligations.
However, supporters of the new legislation argue that it is necessary to ensure that taxpayers are paying their fair share of taxes. They also note that the new legislation would build on the existing reporting requirements that are already in place for other financial institutions.
The legislation is still in the early stages of development and it is unclear what the final form of the legislation will be or when it might be introduced. However, the Block’s report indicates that there is a growing interest in expanding the reporting requirements on cryptocurrency brokers in order to improve tax compliance in the industry.
