Reports from lobbying activities or public records

U.S. Treasury Finalizes 2027 Crypto Broker Rules; DeFi Front-Ends Required to KYC Users

Dec 27, 2024, 03:34 PM

The U.S. Treasury Department and the Internal Revenue Service (IRS) have finalized a comprehensive 115-page set of reporting requirements for cryptocurrency brokers, including decentralized finance (DeFi) platforms and non-fungible tokens (NFTs). The rules, published on December 27, 2024, define many DeFi front-end operators and protocols as "brokers," mandating them to implement Know Your Customer (KYC) procedures and collect and report user trading information—including that of both U.S. and non-U.S. persons—to the IRS. These reporting obligations are set to begin on January 1, 2027, two years later than the requirements for centralized exchanges and platforms. The regulations aim to enhance tax compliance by tracking digital asset transactions. However, industry stakeholders have criticized the rules, arguing that they impose burdensome requirements on DeFi participants and could stifle innovation. Some have suggested that the new pro-crypto Congress may seek to roll back these regulations through the Congressional Review Act process. Legal challenges are also anticipated, with opponents claiming that the rules exceed the IRS's authority and could be overturned in court.