The US Internal Revenue Services (IRS) and Treasury are facing legal action from a number of blockchain trade groups over newly introduced rules for crypto brokers.
The Blockchain Association, DeFi Education Fund and the Texas Blockchain Council filed the lawsuit in a US District Court in Texas.
According to the filing, the rules, which are set to come into force in 2027, are “unconstitutional” and will “cripple the digital asset industry”.
The IRS issued its final regulations on 27 December, rules that will require crypto brokers to report digital asset transactions and will also extend reporting requirements to include decentralised exchanges and other front-end platforms.
In a statement, the trio of blockchain groups accused the US government of ignoring industry feedback and leaving the digital asset sector with a rule that puts an “unlawful compliance burdens on software developers” and will “stifle innovation and burden American entrepreneurs”.
“The IRS and Treasury have gone beyond their statutory authority in expanding the definition of ‘broker’ to include providers of DeFi trading front-ends even though they do not effectuate transactions,” said Marisa Coppel, head of legal, Blockchain Association.
“Not only is this an infringement on the privacy rights of individuals using decentralized technology, it would push this entire, burgeoning technology offshore.”
Meanwhile, the DeFi Education Fund CEO, Miller Whitehouse-Levine, said he was “incredibly disappointed” with the decision.
“Decentralized Finance promises to make financial services and the digital economy more accessible, efficient, interoperable, dependable, and consumer-focused — this promise is at the heart of our work at the DeFi Education Fund. This unfortunate rulemaking is a direct threat to financial innovation, and we intend to fight it using every tool available to us.”