NEW YORK , Nov. 10, 2023 /PRNewswire/ — Industry experts and academics met on November 9 to discuss the potential implications of the IRS’ proposed regulations on new reporting rules for digital assets.
Sarah Kreps, government professor and head of the Tech Policy Institute at Cornell University, hosted a frank discussion with Susan Joseph, a lawyer/consultant and Executive Director of the Cornell FinTech Initiative, John Wu, President of Ava Labs, and Jason Schwartz, Tax Partner and co-head of the Digital Assets & Blockchain Practice at law firm Fried, Frank, Harris, Shriver & Jacobson LLP. The group explored what the new regulations could mean for the job market, industry, and the US economy.
In August 2023, the IRS proposed new regulations, which would generally require anyone who “directly or indirectly” facilitates a digital asset transaction–including by simply developing software or hosting a website–to report the transaction on a Form 1099.
The group argued that proposed regulations would likely cripple the industry. In essence, every purchase using cost-efficient stablecoins –say, to pay for a coffee at Starbucks – would require the payment processor to issue a Form 1099 to both the buyer and the IRS reflecting the transaction. This means the buyer’s name, address, and social security number would be collected simply to purchase a cup of coffee and the buyer would receive a tax Form 1099 for each transaction.
“The IRS is looking at what it could gain, but not at the massive potential 28 billion-dollar loss if the innovation simply stagnates. Innovation is profitable, and we need to support it in the US so the jobs and services associated with it do not move abroad,” says Joseph. “By the IRS’s own estimates, it would almost triple the paperwork that the IRS would have to process, with a cost to the economy of $75.2 billion annually,” adds Schwartz.
The US is the second most innovative country in the world, and the new reporting rules add hurdles that could push it further down in the list.
“The proposed regulations would stretch the definition of ‘broker’ beyond what Congress contemplated or the Constitution allows, require information collection and reporting by individuals and entities incapable of collecting that information, unnecessarily endanger the personal data of millions of Americans, confuse taxpayers, stress government resources, stifle innovation, and sabotage American businesses and competitiveness,” says Schwartz.
Decentralized entities would also be thwarted. Requirements to collect customer information would come at a cost in terms of both time and money. Neither is it guaranteed that this data collection would be feasible if customers leave or move to offshore Decentralized Exchanges (DEXs).
“Innovators and startups will be disproportionately burdened by compliance and operational requirements. Some of them will have to become taxation experts while developing their technology and product – and this is a huge barrier to entrepreneurialism and innovation,” says Wu. “Others simply won’t innovate in the US.”
Kreps summarized the conversation: “While the IRS and taxpayers need information about transactions in digital currencies to determine users’ tax liability, the proposed regulations’ putative solution of requiring virtually everyone to report that information to the IRS is a backdoor way to stifle innovation and the industry as a whole.”
The proposed regulation is open for public comment until November 13th, 2023.
Click here to hear the discussion: New Crypto Policy Could Stifle Innovation And Economy
Media contact: Sarah Magnus-Sharpe, [email protected]
SOURCE Fintech at Cornell, an Initiative of the Cornell SC Johnson College of Business
Originally published at https://www.prnewswire.com/news-releases/cornell-podcast-explores-how-proposed-irs-crypto-policy-could-stifle-innovation-and-economy-301984982.html
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