Jerry Brito, the Executive Director of Coin Center, addressed the cryptocurrency community on January 2, 2024, with a critical update on a new law affecting crypto transactions.
Brito is the Executive Director of Coin Center, a leading non-profit research and advocacy center focused on public policy issues facing cryptocurrency and decentralized computing technologies like Bitcoin and Ethereum. Brito has been a prominent figure in the field of cryptocurrency policy and regulation. He has played a key role in educating policymakers about crypto technologies and advocating for sensible regulatory approaches that would allow for innovation in this space while also addressing potential risks.
Coin Center is a non-profit research and advocacy organization based in Washington, D.C., that focuses on public policy issues related to cryptocurrencies and decentralized computing technologies like Bitcoin and Ethereum. Its mission is to build a better understanding of these technologies and to promote a regulatory climate that preserves the freedom to innovate using permissionless blockchain technologies.
In a blog post published on 2 January 2024, Brito outlines this legislation’s complexities and potential legal pitfalls, emphasizing its practical challenges and constitutional concerns.
Overview of the New Law
The Infrastructure Investment and Jobs Act, passed in November 2021, introduced a provision amending the Tax Code. This law, effective from January 1, 2024, mandates anyone receiving $10,000 or more in cryptocurrency as part of their business to report the transaction to the IRS. The report must include the sender’s personal details, the transaction amount, and its nature. Failure to report within 15 days could result in felony charges.
Immediate Operational Status
Brito notes that this law is self-executing, requiring no further regulatory action for enforcement. It became operational upon enactment, making all Americans subject to its terms from the start of 2024.
Coin Center’s Legal Challenge
Brito mentions that Coin Center filed a lawsuit against the Treasury Department in June 2022, contesting the law’s constitutionality. However, the case remains unresolved, leaving the reporting requirement in effect. Brito says that while Department of Justice lawyers have suggested the law might not be enforceable until further regulations are issued, the IRS has not confirmed this, and the statute is currently active.
Compliance Difficulties
Brito highlights several practical issues in complying with the law. For instance, it’s unclear whose details miners or validators should report when receiving block rewards over $10,000. The law also lacks clarity on reporting requirements for decentralized crypto exchanges and the valuation standard for cryptocurrencies.
Uncertainty in the Reporting Process
Brito points out that the law stipulates reporting “in such form as the Secretary [of the Treasury] may prescribe,” yet no specific guidance for cryptocurrency has been issued. He notes that, currently, Form 8300 is used for cash transactions, but its applicability to cryptocurrencies remains unclear, especially since FinCEN, which also receives these forms, has no authority over cryptocurrency transactions.
Potential IRS Action and Compliance Challenges
Brito says the lack of clear guidance from the IRS leaves recipients of large cryptocurrency amounts in a difficult position, potentially leading them to notify the IRS in various ways to demonstrate compliance. He expresses concern about how Coin Center itself would comply, especially in cases of anonymous donations.
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