The crypto industry in the United States is about to score a major legal victory as the US Department of the Treasury plans to exempt cryptocurrency miners and other “auxiliary parties” from tax reporting rules.
In a letter to a group of senators on Friday, the US Treasury Department indicated that it plans to exempt cryptocurrency miners, stakers and other market participants from rules that require cryptocurrency brokers to share their clients’ transaction data with the Internal Revenue Service.
“Thanks to the Department of the Treasury for confirming that cryptocurrency miners, stakers, and those who sell wallet hardware and software are not required to file tax returns,” said Ohio Republican Senator Rob Portman, announcing the news on Twitter.
We thank the Treasury Department for confirming that cryptocurrency miners, stakers, and those who sell hardware and software for wallets are not required to file tax returns. As I said from the beginning, this requirement only applies to brokers.pic.twitter.com/k5l6kDs4iA — Rob Portman (@senrobportman) February 12, 2022
In the letter, Assistant Secretary of the Treasury for Legislative Affairs Jonathan Davidson stated that the department’s position is that “auxiliary parties that cannot access information useful to the IRS are not intended to be subject to reporting requirements for brokers.”
Davidson also emphasized that cryptocurrency validators are “unlikely to know if a transaction is part of a sale,” while individuals involved in providing services related to cryptocurrency hardware or software wallets are “not brokering.”
The Treasury will also consider “to what extent other parties in the digital asset market, such as centralized exchanges and those often referred to as decentralized exchanges and peer-to-peer exchanges, should be treated as brokers,” the letter notes.
Bloomberg reports that the Treasury plans to publish proposed rules to include its position on the definition of a broker.
Related: No Precedent: IRS Judgment Doesn’t Clarify Cryptocurrency Staking Taxes
As previously reported, President Joe Biden signed a $1 trillion infrastructure bill in mid-November 2021, requiring crypto market participants to report all digital asset transactions over $10,000 to the IRS.
Several senators, including Pennsylvania Republican Pat Toomey, Oregon Democrat Ron Wyden and Wyoming Republican Cynthia Lummis, subsequently urged the Treasury to clarify the definition of a broker in the infrastructure law in December, planning to propose legislation to that effect. A group of House Democrats also supported a similar initiative in November.