Pending the release of new regulations, the IRS and the US Treasury Department announced on January 16 that businesses dealing in cryptocurrencies will no longer have to follow its mandatory reporting requirements for monetary transactions exceeding $10,000, providing crypto businesses some relief.
This announcement comes in tandem with the Infrastructure Investment and Jobs Act enactment, which requires reporting all virtual asset transactions over $10,000 in the United States to the Internal Revenue Service (IRS) for tax purposes.
With the new press statement obtained from the United States Internal Revenue Service (IRS) in the late hours of Tuesday, the IRS confirmed businesses won’t have to report receiving virtual assets for tax purposes until the agency introduces new regulations.
What was wrong with the Infrastructure Investment and Jobs Act?
The Infrastructure Investment and Job Act is not new; it was signed into law by President Joe Biden in 2021 and has been effective since then. Generally, the relevant section of the Act only requires businesses to report cash transactions worth over $10,000 to the government to aid
However, an amendment in 2022 modified it to treat cryptocurrencies as cash, essentially including virtual assets like Bitcoin in the list of monetary transactions that businesses will have to report within a 15-day window, an impractical move that would come to backfire significantly.
For one, many observers pointed out how the anonymous nature of Bitcoin transactions makes it technically impossible for firms to comply with the directive. For context, businesses that receive over $10,000 in cryptocurrency funds must submit details to the IRS, including sender names, addresses, and social security numbers.
Outside businesses, others were affected as well. Individuals who receive cryptocurrency payments exceeding $10,000 will also have to report the details to the IRS. As expected, crypto enthusiasts started pointing out the absurdity of the new directive quickly, ultimately driving the IRS to reverse course and exempt virtual assets from the new Infrastructure Investment and Jobs Act reporting requirements.
Coin Center Challenged the Directive
Shortly after the directive from the tax man requiring businesses to report all cryptocurrency transactions exceeding $10,000, DC-based crypto think tank Coin Center filed a suit against the agency at a Kentucky District Court, alleging sabotage to blockchain privacy.
However, the IRS scored a dismissal in the lawsuit after Coin Center failed to convince the judge of the merit of its case. The cryptocurrency think tank has filed an appeal in Federal Court, only for the IRS to overturn the directive with the case still in court. Reacting to the newest development, Coin Center Executive Director Jerry Brito celebrated the admission from the IRS regarding the impossibility of its directive.
The Crypto Community Celebrates Temporarily
The initial announcement came with many strong reviews online, with most observers pointing out the impossibility of enforcing the new act. Jerry Brito, executive director at the Coin Center, was the loudest voice against the directive, speaking not only with multiple posts on X but also with a lawsuit against the US agency.
“There are many unanswered questions like, what if you receive funds from a block reward or a DEX transaction? Who do you report as the sender,” he recently tweeted, echoing the talking points of most critics of the policy.
As expected, Jerry Brito was among the first to celebrate the announcement overturning the directive. However, Coin Center, his company currently suing the tax man, is yet to announce a withdrawal of the suit, and we assume the advocacy group is waiting to see what happens next.
Jerry Brito is not the only stakeholder speaking out openly against the IRS. X user ’16 years of song a day’ wrote a song for the new IRS law he describes as “draconian.” Additionally, American crypto investor Ryan Adams wrote a post on X about the law, pointing out the lack of reporting guides.
Everyone opposing the measure can now have some relief until the IRS moves again on cryptocurrency transaction reporting. At least.
