A group of nine bipartisan US lawmakers have appealed treasury department To reconsider its proposed digital asset taxation regime, expressing concern that the current proposals, if implemented, could stifle innovation and adversely impact the digital asset ecosystem.
The central issue revolves around the Treasury’s approach to defining ‘brokers’ and ‘digital assets’ for tax reporting purposes under proposed rules issued on August 25.
Lawmakers argue that the definitions are overly broad and could cover a wide range of entities within the digital asset ecosystem, including decentralized finance (DeFi) exchanges.
The lawmakers’ letter to Assistant Secretary Lily Batchelder highlights concerns that Treasury’s expanded definition of ‘broker’ could include entities that lack the traditional characteristics of a broker.
They argue that this interpretation could unnecessarily entrap many DeFi entities into regulatory requirements that are not appropriate for their operations.
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Furthermore, lawmakers pointed out that the proposed rules do not differentiate between the different uses and characteristics of different digital assets.
This includes including stablecoins and non-fungible tokens (NFTs) under the definition of “digital assets,” potentially limiting their use in the market and undermining Congressional efforts to regulate payment stablecoins.
In terms of implementation, the Group raised concerns about the accelerated timelines for both the comment period and the implementation phase of the proposal.
They urged Treasury to extend the comment period to December 31, 2023, to allow for more comprehensive feedback and adjustments to the final rule.
The lawmakers warned that if these concerns are not addressed, the US risks pushing these digital assets into shadow systems, hindering their integration into mainstream financial systems.
He stressed the need for a practical tax reporting framework that supports the continued survival and growth of the digital asset ecosystem in the US