The Wall Street Blockchain Alliance (WSBA) Asks the IRS to Illuminate on its Crypto Tax Categorization

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On the Internal Revenue Service’s (IRS)
most recent move to classify cryptocurrency assets under the property class, US
cryptocurrency community is grim with the decision of the IRS after it has
categorized crypto assets under property class in its regulatory guidance
directives for virtual currencies.
The cryptocurrency firms are thus in a mode
of challenging the IRS on its definition of ‘Crypto-assets.’ The majority of
them contemplate that this is an additional compliance and reporting
encumbrance on their tax accounting regime.
The Wall Street Blockchain Alliance (WSBA),
a non-profit Crypto Trade Organization has corresponded with The IRS recently displaying
their reluctance about the proposed categorization of the crypto assets under the
property. In the letter to the IRS, they have broadly covered issues related to
staking, airdrops stablecoin, loans among others. They also have expressed that
the current classification of cryptocurrencies might not be appropriate but the
additional compliance and reporting might create a nuisance and inconvenience
for the crypto firms.
It apparently shows no value addition to
the taxpayer as well as it is inadequate for the merchants as to the date they
are not accepting crypto-currencies as payments for retail shopping or
services.
Kell Canty, CEO of Crypto Accounting firm
Verady said," one of the signatories to the letter said," recent
draft legislation proposing exemptions based on the amount of potential capital
gains may further complicate the already complex accounting and reporting
issues around crypto-assets by mandating
circulating capital gains on every
transaction.’’
It is noteworthy that recently in last
month, Verady in collaboration with media giant Thomson Reuters has developed blockchain-based
crypto- taxation software tool “Virtual Currency Organizer” to bring the
cryptocurrency industry under tax regime.
The WSBA is pressurizing the IRS to resolve
to establish a ‘De minimis exemption for both individuals and merchants’ that
would establish a minimum transaction value constraint for tax reporting
purposes. It will thus minimize the compliance obligation on individual crypto
users and the other involved parties.
The letter has recommended certain points
indicating about implications of crypto-assets including the varied tax
structure treatment based on their usage, cost basis and fair market value
(FMV) is determined for cryptocurrency assets.
WSBA also seeks more clarity for crypto-assets
reporting and disclosure and transparency on the tax treatment for airdrops as well.
It is asking for clear directions about how to treat stable coin issuances for
tax purposes and if they should be exempted from like-kind exchanges.
The association also wants clear guidelines
about the implications of treating crypto assets as intangible assets,
Clarification on potential tax implications of the transfer of ownership loan
and hypothecation of assets regarding decentralized finance, tax implications
of taking a stake specific blockchain.
The letter suggests the IRS to continue to
engage in a proactive and iterative process toward working on new principles
and revenue decrees and also additional clarifications on existing guidelines.
IRS Prior Attempts for Crypto Tax Obligations
In the past years, the IRS has issued
several warning statements to the cryptocurrency users about the guidance activated
from 2014. An FAQ has also been posted on the website of the IRS to assist the
crypto tax users to pay their taxes. In 2019, it also had issued cautionary
notices and educational material to instruct the taxpayers about the crypto-related
taxes.
#IRS #WSBA #CryptoAssets #Blockchain #Cryptocurrency
#IntangibleAssets #CryptoTaxation

Jayashree Ingle
CBW - External Analyst
INDIA