Summary
The Internal Revenue Service (IRS) now requires businesses and professional traders that receive over $10,000 worth of cryptocurrencies to report their transactions. Failure to comply could result in felony offenses. However, there has been little guidance from the IRS on who exactly is subject to reporting obligations, causing concerns among traders. The reporting requirement applies to individuals or businesses engaged in a “trade or business” related to cryptocurrencies. The criteria for determining whether someone falls under this category include whether contributing to a decentralized autonomous organization (DAO) is their full-time job or main source of income. The same logic can be applied to airdrop farmers and stakers. The lack of clarity from the IRS has led to a court challenge by crypto think tank Coin Center, who argue that the provisions are unconstitutional.
Key Points
1. Businesses and professional traders receiving over $10,000 worth of cryptocurrencies must report their transactions to the IRS and failure to comply may result in felony offenses.
2. There is a lack of guidance and clarification from the IRS regarding who is subject to reporting obligations, causing concerns among traders using decentralized finance protocols.
3. The determination of whether a person falls under a “trade or business” for reporting purposes depends on factors such as whether it is their full-time occupation, main source of income, and if they engage in the activity throughout the year.