Debate: Should Crypto Exchanges Be Required to Report on Customers to the IRS?

Their Reasons:

Bloink: For too long, taxpayers have profited from cryptocurrency transactions without paying their fair share of taxes. It's been a loosely regulated industry that has given investors the opportunity to hide gains for years. The new expansive reporting regime will go a long way to put an end to that so that everyone is paying taxes on their investment gains in the proper manner.

Byrnes: This expansive new law is going to be an administrative nightmare. It's overly broad in that it imposes reporting requirements even on parties that may not have the relevant information they're being asked to provide. The parameters of the new reporting requirements should have been tailored before the legislation was passed.

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Bloink: Yes, the provisions are broadly defined, but we also have the prospect of regulations that will clarify and define the broad terms of the law as we have it today — just like any other law passed by Congress. The fact is, we're talking about a relatively new asset class. Expansively defined provisions are necessary to generate the transparency that the IRS needs in its collection efforts going forward.

Byrnes: I don't see the law as currently drafted as standing. The definition of "broker" that is used will create unintended consequences. Yes, it's a fairly new asset class, but that doesn't mean we can't provide clear guidance to parties who engage in these transactions. My guess is that Congress will step in to clarify and limit the scope of these reporting rules.

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Bloink: The IRS has a better sense of the types of information it needs to enforce the law. Yes, if it turns out that the scope of the law is creating a hardship for parties it wasn't intended to regulate, the IRS and the Treasury Department can tailor the law. The way the law has been drafted gives them the power to make changes as needed to ensure the reporting requirements are applied fairly and uniformly for their intended purpose: collecting revenue derived from virtual currency investment gains.

Byrnes: Staying on the right side of this law is going to be unnecessarily expensive for many parties. A lot of people are going to be surprised by the tax consequences of these new reporting requirements — and not all of them can afford to shell out cash to get advice from someone with expertise in cryptocurrency reporting and taxation.

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