I'm writing to share the Blockchain Association's strong opposition to the IRS's proposed broker-dealer rules. Our advocacy group argues that these rules would impose an undue burden on investors, cryptocurrency companies, and even the IRS itself.

In our latest letter, we pointed out that the IRS's proposal violates the Paperwork Reduction Act, which mandates that government regulations should not burden individuals and entities with unnecessary paperwork.

We highlighted the immense logistical and financial strain these rules would cause. If implemented, the regulations would result in the creation of 8 billion 1099-DA tax forms, require 4 billion hours of labor to process them, and incur an annual compliance cost of $254 billion. These figures starkly contrast with the IRS's initial estimate of 0.15 hours per customer and a total compliance cost of $136.35 million.

Moreover, we argued that imposing such a high compliance cost is unreasonable for an asset class and market that produces, at most, a $10 billion tax gap.

This isn't the first time we've voiced our concerns. In 2023, we sent a 39-page letter to the IRS outlining our objections to the proposed broker regulations. We described the rules as government overreach and emphasized that certain entities, particularly decentralized finance protocols, would struggle to comply.

Our letter also pointed out "fundamental misunderstandings" about cryptocurrencies, digital assets, and decentralized finance among U.S. government officials. These officials seem to have difficulty grasping the paradigm shift introduced by blockchain technology.

The proposed tax rules have not been well-received by the crypto community. Many individuals and institutions have expressed their disdain for these requirements, which they see as out of touch with the realities of decentralized networks. Echoing our objections, Jerry Brito, executive director at Coin Center, noted the logistical challenges of imposing these reporting requirements on decentralized networks and their participants.

In summary, we believe these IRS broker rules are not only impractical but also impose excessive burdens that far outweigh their intended benefits.