Concerns Raised by the Blockchain Association: Proposed Crypto Regulations Threaten DeFi Sector

Introduction

The Blockchain Association, a pro-crypto lobbying group, has expressed concerns about the potential consequences of new proposed crypto regulations from the U.S. Department of the Treasury. These regulations, if implemented, could have a detrimental effect on the domestic decentralized finance (DeFi) sector.

Proposed Regulations

In August, the Treasury Department and the Internal Revenue Service (IRS) introduced a new proposal that outlines additional reporting requirements for entities referred to as 'crypto brokers.' The term 'crypto broker' encompasses trading platforms, digital asset payment processors, certain digital asset-hosted wallet providers, and individuals involved in redeeming crypto assets.

Under the proposed regulations, crypto brokers would be obligated to report detailed information about their users' crypto asset sales and transfers to tax authorities.

Concerns Raised by the Blockchain Association

The Blockchain Association recently filed a comment expressing its opposition to the Treasury's proposed rules. Marisa Tashman Coppel, the senior counsel of the lobbying group, argues that the proposal goes beyond the regulator's statutory authority.

According to Coppel, the proposal would force decentralized projects to abandon the very technology that sets them apart. This could result in the relocation or extinction of US-based decentralized projects. Additionally, the proposal would require centralization in cases where it currently does not exist.

Coppel suggests that the definition of 'broker' in the proposal should be limited to centralized entities capable of collecting the required information. This aligns with the original intent of Congress when it established the clarified definition two years ago and with the historical functioning of broker reporting rules.

Conclusion

The proposed crypto regulations put forth by the U.S. Department of the Treasury have raised concerns within the crypto community, particularly among proponents of decentralized finance. If implemented, these regulations could have a significant impact on the DeFi sector, potentially driving US-based decentralized projects out of existence or abroad. The Blockchain Association urges the Treasury to reconsider the scope of the regulations and ensure that they align with the principles of decentralization and innovation.