US Proposes New Crypto Tax Rules: Criticism and Legal Challenges
The United States Internal Revenue Service (IRS) has unveiled proposed regulations for brokers regarding the sale and exchange of digital assets. These rules introduce a new form to streamline tax filings and combat tax evasion in the crypto space. However, the regulations have sparked criticism from industry figures and prompted legal discussions.
The IRS aims to enhance tax reporting for digital assets by requiring brokers to use a dedicated form. This move is intended to align digital asset reporting with reporting mechanisms for other types of assets. The regulations, set to come into effect in 2026 for transactions conducted in 2025, are currently open for public comment until October 30th. The IRS plans to conduct a public hearing after that date to gather further input.
Prominent figures within the crypto space have expressed reservations about the proposed crypto tax regulations. Kristin Smith, CEO of the Blockchain Association, highlighted the unique nature of the crypto ecosystem compared to traditional finance. DeFi Education Fund CEO Miller Whitehouse-Levine criticized the rules as "confusing, self-refuting, and misguided." Ryan Selkis, CEO of Messari, went so far as to suggest that the crypto industry's prospects in the U.S. would be grim if President Joe Biden were reelected. Representative Patrick McHenry, Chairman of the House Financial Services Committee, characterized the proposal as part of the Biden Administration's ongoing assault on the digital asset industry.
Cryptocurrency exchange Gemini has submitted a reply brief as part of its efforts to dismiss a lawsuit brought against it by the U.S. Securities and Exchange Commission (SEC). Gemini contends that the SEC's claims lack clarity and urges the court to avoid grappling with the SEC's intricate analyses. The company suggests that straightforward questions should determine whether its offering qualifies as a security. The SEC alleges that Gemini Earn, a service enabling customers to lend crypto assets, violated securities regulations by offering unregistered securities.
A U.S. District Judge upheld the U.S. Copyright Office's stance that artworks exclusively generated by artificial intelligence (AI) are ineligible for copyright protection. This ruling comes amid concerns about AI potentially displacing human artists and writers. It also coincides with ongoing legal debates about AI companies employing copyrighted content for training purposes. Multiple lawsuits in California challenge AI-generated content's use of copyrighted material, which could lead AI firms to reevaluate their models.
In the United Kingdom, discussions are underway regarding a potential ban on cold calls related to financial investments. The U.K. Treasury is seeking evidence on the potential impact of such a ban on businesses and its effectiveness against scammers. While aimed at protecting consumers, the ban's implementation could influence industries reliant on cold calling for prospecting. The consultation period ends on September 27, 2023.
As the crypto industry grapples with evolving regulatory frameworks and legal challenges, these developments underscore the complex relationship between emerging technologies and existing legal paradigms.