US to Delay Implementation of Tax Reporting for Crypto Brokers

U.S. authorities are delaying the implementation of new rules requiring cryptocurrency brokers to report their clients' gains and losses to the Internal Revenue Service (IRS).

The new rule, signed by the Biden administration at the end of 2021, is expected to take effect next month.

Under the new rules, cryptocurrency exchanges will be required to use a tax form known as 1099-K to record the cryptocurrency activities of an individual subject to taxation. In other fields, this form is usually only required for taxpayers who engages in transactions worth an aggregate $20,000 or more.

The IRS believed that the anonymity of crypto transactions presents an opportunity for taxpayers to conceal their crypto activities and related taxable income. Therefore, the authorities saw the need to compel cryptocurrency brokers to generate 1099 Forms, which would help improve tax compliance.

This year, the development of the crypto industry has been sluggish, and a large number of investors have lost confidence in the industry. In order to win back the favor of customers, crypto exchanges such as Binance and OKX​ have released their Proofs of Reserves to revive the reputation of the industry. However, Binance​'s recent audit left many investors unimpressed.

Paul Munter, acting chief accountant for the U.S. Securities and Exchange Commission (SEC), said: "Investors should not place too much confidence in the mere fact a company says it's got a proof of reserves from an audit firm." He explained that these reports didn't provide investors with information to assess whether crypto firms can cover their liabilities.