The crypto industry, particularly brokers, is getting a big lift from Texas Senator Ted Cruz this week. According to an Axios report, Cruz will use the Congressional Review Act (CRA) in the next few days to challenge an existing IRS tax rule on crypto income reporting. This IRS reporting rule has generated plenty of pushback from the crypto community, leading to the filing of charges.
The rule requires full reporting of income generated from cryptos and expands the “broker’ definition, which, according to critics, doesn’t reflect the true nature of decentralization.
Cruz’s reported plan to challenge this IRS rule was met with enthusiasm by the crypto community and seen by many as a principled stand against government interference.
IRS Tax Rule And ‘Broker’ Definition Stifle Innovation, Critics Say
Senator Cruz’s latest move is based on the crypto community’s lingering complaints over the IRS’s unfair tax crypto rules. Critics slammed the agency’s use and definition of “broker” under the Administrative Procedure Act, which they see as arbitrary and too general. This arbitrary definition and the IRS overreach into the blockchain industry were met with resistance by top crypto players and companies.
In response, three groups, the DeFi Education Fund, the Blockchain Association, and the Texas Blockchain Council, have sued the agency over these changed rules.
The petitioners argued that the rule failed to appreciate the decentralized nature of cryptocurrency and blockchain. They added that many crypto participants have no access to the data that the agency is requesting.
Cruz To Use The CRA To Challenge These IRS Rules
Many see Sen. Cruz’s plan to use the CRA as a welcome development and signal the community’s rejection of the government’s interference. The CRA allows policymakers to stop federal regulations through a simple majority in both houses, which must be completed within 60 business days. According to the same Axios report, Cruz is confident the rule will be challenged and thrashed.
The plan has gained plenty of support from Republican senators, including Senator Cynthia Lummis of Wyoming, Tim Sheehy of Montana, and Bill Hagerty of Tenessee. Senator Lummis is a well-known supporter of Bitcoin and the blockchain and filed a bill last year recommending the creation of a Bitcoin stockpile.
A Questionable Reporting Rule
The crypto community’s complaints and cases are based on an IRS reporting rule in the 2021 infrastructure bill. According to the tax rule, crypto brokers must report their income from digital assets like Bitcoin. For many crypto supporters, the rule effectively forced them to serve the state with money earned from innovation.
According to Ron Hammond of the Blockchain Association, the rule has become politically charged and was a rallying point for many individuals. For Senator Cruz, the challenge represents his support for individual rights against the government’s intrusion.
Featured image from Pexels, chart from TradingView
