Consensys, a prominent blockchain development firm, has formally requested the U.S. Internal Revenue Service (IRS) to delay the implementation of new cryptocurrency reporting regulations, highlighting concerns over clarity and potential adverse effects on industry players.

In a detailed letter to the IRS, Consensys expressed apprehension regarding the proposed tax rules requiring brokers and exchanges to report specific cryptocurrency transactions. The regulations, akin to those governing traditional brokers handling stocks and bonds, were first outlined last August and subsequently detailed in an April draft of Form 1099-DA by the IRS.

According to Consensys, the current draft of Form 1099-DA lacks sufficient clarity and imposes a broad definition of "broker." This ambiguity could lead to multiple entities reporting the same transactions, thereby complicating compliance efforts and potentially burdening entities unaccustomed to regulatory reporting.

"We must echo our overarching concern that certain aspects of the regulations do not adequately consider the burden on entities that would be classified as brokers, including those that traditionally do not bear any reporting obligations," the letter stated.

Consensys, known for developing the popular MetaMask wallet, raised specific issues with the draft form's lack of comprehensive instructions for brokers. This deficiency, as per the letter, poses significant challenges for firms attempting to devise implementation strategies ahead of the looming tax filing deadlines.

Moreover, the blockchain firm underscored concerns about the regulations' implications for data privacy within the crypto industry. It argued that the proposed rules could inadvertently compromise user privacy, a critical aspect given the decentralized nature of blockchain transactions.

Bill Hughes, senior counsel at Consensys, urged other potentially affected firms to voice their concerns before the impending regulatory deadline. He emphasized the potential detrimental impact on U.S.-based companies that provide blockchain interfaces like self-custody wallets, which may struggle to comply with manual reporting requirements.

Earlier critiques from industry figures, such as Ji Kim from the Crypto Council for Innovation, have similarly highlighted concerns about the IRS categorizing unhosted wallet providers as brokers. Kim emphasized that such a classification overlooks the technical nature of wallet providers, who typically lack visibility into transaction specifics or participant identities.

As Consensys continues to advocate for a delay and clearer guidelines from the IRS, the crypto industry awaits further developments that could significantly influence how regulatory frameworks accommodate the unique characteristics of blockchain technology and digital assets.