Oct. 22, 2023
Public Comment on Proposed Regulations REG-122793-19 I am writing to provide my comments on the proposed regulations regarding Gross Proceeds and Basis Reporting by Brokers and the Determination of Amount Realized and Basis for Digital Asset Transactions, issued by the Internal Revenue Service (IRS) and the Treasury Department (Agency/Docket Number: REG-122793-19). 1. Introduction and Summary: The proposed regulations aim to establish information reporting requirements for brokers and digital asset trading platforms in relation to certain sale or exchange transactions involving digital assets. While I appreciate the need for transparency and compliance in the rapidly evolving digital asset space, there are several concerns I would like to address. 2. Key Dates and Contact Information: I commend the IRS and Treasury Department for providing sufficient time for public input, with a comment period until October 30, 2023. It is crucial to have thorough discussions and take into account various stakeholders' perspectives. I would encourage multiple public hearings to ensure a comprehensive understanding of the potential impact of these regulations. 3. Background on Digital Assets and Virtual Currency: Digital assets and virtual currencies have emerged as innovative forms of value storage and exchange. As defined in the proposal, digital assets use cryptography and distributed ledger technology, while virtual currency serves as a medium of exchange or store of value. It is paramount that any regulations recognize the unique nature of these assets and do not stifle their growth and adoption. 4. Wallets and Digital Asset Trading Platforms: The proposal acknowledges the distinction between digital asset wallets and digital asset trading platforms. Understanding this difference is crucial to ensure that regulatory burdens are not placed on users of non-custodial wallets or platforms that merely facilitate peer-to-peer transactions. Simplifying reporting requirements for individuals without compromising compliance standards would be a more balanced approach. 5. Application of Existing Information Reporting Rules: Sections 1001, 1012, and 6041 of the Internal Revenue Code provide the framework for determining gain or loss, property basis, and information reporting. While it is important for the IRS to update regulations to match technological advancements, any changes should be mindful of existing provisions to avoid unnecessary redundancies or confusion. 6. Proposed Regulations and Reporting Rules: The proposed regulations intend to extend information reporting to brokers acting as agents, principals, or middlemen for digital asset sales or exchanges. Although information reporting is vital for tax compliance, it is necessary to strike a balance between accountability and administrative burden. The impact on smaller actors within the digital asset ecosystem should be carefully considered, with tailored reporting requirements for different types of entities. 7. Digital Asset Transactions and Reporting: The proposed regulations require real estate reporting persons to include the fair market value of digital asset consideration received in real estate transactions. While transparency is important, determining the fair market value of digital assets might present practical challenges. The IRS should provide clear guidelines to ensure consistent and accurate reporting without placing undue burden on reporting persons. 8. Digital Asset Definitions and Types: The proposal acknowledges the various terms and categories used for digital assets, including coins, tokens, and virtual currencies. As this space evolves rapidly, it is essential to maintain a technology-neutral approach that does not hinder innovation or unfairly favor certain digital asset types. Flexibility in regulation can accommodate future developments and avoid stifling potential growth areas. 9. Digital Asset Wallets and Their Types: The proposal rightly distinguishes between different types of digital asset wallets, such as digital or physical, connected or disconnected, and custodial or non-custodial. Conservative regulations must acknowledge the importance of user autonomy and privacy when it comes to self-custody wallets, without compromising necessary oversight measures related to custodial wallets. Striking the right balance will preserve individuals' rights while ensuring responsible reporting. 10. Digital Asset Trading Platforms and Transactions: Digital asset trading platforms play a vital role in facilitating transactions and liquidity in the digital asset market. However, it is essential to avoid unnecessary regulatory duplication when they already comply with existing financial regulations. Reporting requirements should be streamlined to minimize redundancy and consider the specific functions of each platform within the broader ecosystem. In conclusion, while the proposed regulations aim to enhance transparency and compliance in the digital asset landscape, it is crucial to strike a balance between accountability, practicality, and fostering innovation. I urge the IRS and the Treasury Department to engage in further dialogue with industry stakeholders and take into account the concerns mentioned above to ensure efficient and effective regulations that support the growth of this emerging sector. Please do not hesitate to reach out if you need any further clarification or have any questions regarding my comments. I appreciate this opportunity to voice my concerns and contribute to the shaping of these regulations. Thank you for your attention to this matter. Sincerely, Von meinem iPhone gesendet