Exploring Decentralization, Compliance, and Tax Regulations in DeFi and DAOs

When we want to understand the new IRS proposed regulations on digital asset brokers, Ian Andrews (CMO, Chainalysis) knows to speak to Roger Brown (Global Head of Tax Strategy, Chainalysis) before anyone else. 

Roger does an excellent job demystifying who is going to be captured by the proposed regs and defines key terms in the regulations such as brokers, digital asset middlemen and persons that will be impacted by the proposed legislation. 

He also dissects the impact of these new tax rules on crypto exchanges, payment processors, decentralized platforms, and even DAOs to and describes what facilitative services are that are material to being captured under the regs. 

Ian and Roger also discuss how travel rule requirements may be sufficient to satisfy tax rule reporting and highlight the importance of assessing effective KYC obligations.

• (2:13) - Overview of the recent IRS regulations on crypto tax reporting
• (4:08) - Definition of a broker and digital asset middleman in the context of digital assets
• (8:20) - Impact of the regulations on decentralized protocols and platforms
• (11:45) - Importance of information reporting in crypto to tackle the tax gap 
• (16:50) - IRS's approach to regulating decentralized exchanges leading with guidance vs enforcement 
• (19:02) - Questioning why stablecoin transactions are subject to reporting
• (24:08) - Speculation on the reaction of payment processors to the reporting requirements
• (28:27) - Potential overlap between travel rule compliance and tax reporting
• (31:45) - Consideration of peer-to-peer exchanges and possibility of bypassing reporting requirements by directly interacting with smart contracts
• (35:35) - Importance of assessing effective KYC obligations - It's not a matter of if they will apply it's a matter of when

Check out more resources provided by Chainalysis that perfectly complement this episode of the Public Key.

• Report:  The Chainalysis 2023 Geography of Cryptocurrency Report (Available Now) 
• IRS Proposed Regulations: Gross Proceeds and Basis Reporting by Brokers and Determination of Amount Realized and Basis for Digital Asset Transactions
• Blog: IRS Update: U.S. Proposed Tax Regulations Outline Information Reporting Obligations for Crypto Exchanges and Others
• Blog:  Reporting Obligations of the OECD Crypto Asset Reporting Framework
• Blog: Infrastructure Investment Act Expands Tax Reporting Obligations for Cryptocurrency Exchanges and Others
• Report: Notabene: The State of Crypto Travel Rule Compliance Report 2023
• Webinar: Global crypto adoption: Does regulation matter for growth? (Nov. 2 2023 at 11am ET | 3pm GMT) with Kim Grauer and Caroline Malcolm
• YouTube: Chainalysis YouTube page
• Twitter: Chainalysis Twitter: BuildCareers at Chainalysising trust in blockchain
• Tik Tok: Building trust in #blockchains among people, businesses, and governments.
• Telegram: Chainalysis on Telegram

• Ian Andrews * Host * (Chief Marketing Officer, Chainalysis) 
• Roger Brown (Global Head of Tax Strategy, Chainalysis)

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