IRS Ruling on DEX Reporting Faces Criticism from Crypto Executives

According to Odaily, the recent ruling by the U.S. Internal Revenue Service (IRS) requiring decentralized exchanges (DEX) to adhere to the same reporting standards as traditional brokers has sparked significant criticism from cryptocurrency executives and legal experts. Katherine Minarik, Chief Legal Officer of Uniswap, stated that there are numerous ways to challenge this rule, emphasizing that it should indeed be contested. She questioned the IRS's rationale, arguing that the ruling incorrectly categorizes DeFi platforms as brokers, despite their limited role in the trading process. Uniswap CEO Hayden Adams echoed similar concerns, expressing hope that the decision could be overturned through the Congressional Review Act (CRA) or legal challenges. The IRS's new regulations, announced on December 27, mandate brokers to report total gains from digital asset transactions, including cryptocurrencies, stablecoins, and NFTs. This expanded scope now encompasses front-end DeFi platforms and is set to be implemented in 2027. Critics argue that these requirements are unsuitable for the decentralized nature of such platforms, which often lack the infrastructure for traditional reporting. Robin Singh, CEO of crypto tax platform Koinly, warned that compliance could impose significant operational and technical burdens on decentralized enterprises. Singh highlighted the challenges posed by the decentralized structure of these platforms in meeting traditional reporting standards. Bill Hughes, a lawyer at blockchain development company Consensys, described the ruling as "all cost, no benefit," criticizing its global impact by requiring both U.S. and international users to submit reports. He predicted that the regulation would face congressional scrutiny and potential opposition. Critics also condemned the IRS for releasing the ruling during the holiday season, suggesting it was a deliberate attempt to limit public response. Jake Chervinsky, Chief Legal Officer at venture capital firm Variant, labeled the rule as an "illegal" measure by the outgoing administration's "anti-crypto army." He believes that the courts or a new administration might overturn the decision.