The Blockchain Association has filed a lawsuit against the IRS over new DeFi regulations, challenging the broker classification and KYC requirements.
The Blockchain Association has filed a lawsuit against the IRS over new regulations affecting decentralized finance (DeFi). The Texas Blockchain Council and the DeFi Education Fund joined in filing the lawsuit. In opposing the rules, Kristin Smith, CEO of the Blockchain Association is pushing to overturn them.
She expressed on her X account, “Today we’re taking action, filing a lawsuit that argues today’s broker rulemaking violates the Administrative Procedure Act and is unconstitutional. We stand with our nation’s innovators and will continue working to ensure the future of crypto—and DeFi—is here in the United States.”
Several DeFi protocols have now been reclassified by the new IRS rules as brokers. This will now also require these platforms, which facilitate the buying and selling of digital assets, to follow similar rules as traditional brokers. For digital asset transactions, they will need to reveal Know Your Customer (KYC) information. Consequently, this will help people pay the proper taxes, the IRS says.
Crypto Advocates Hope Trump Administration Will Reverse IRS DeFi Rules
According to the IRS, up to 875 DeFi brokers could be affected by the new rule. The crypto community has expressed concern about this. Moreover, the KYC requirements are seen as a source of worry by many people with regard to privacy and security. The new regulations also may violate constitutional rights, legal experts argue.
Jake Chervinsky, chief legal officer at Variant, called the new rule the ‘dying gasp of the anti crypto army.’ Further, he urged that the rule should be reversed by the courts or the new administration. However, the community is united in opposing these rules. Because they are worried that these rules could restrain innovation in the DeFi area.
This lawsuit is one of many efforts designed to show that the new regulations are unconstitutional. The Blockchain Association hopes President-elect Donald Trump administration will address concerns regarding new DeFi regulations.
Lastly, the future of these new IRS rules is uncertain as the legal battle continues. However, the lawsuit adds to an ongoing tension between the growing DeFi industry and the government.
