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The United States Internal Revenue Service (IRS) is considering a proposal that would have sweeping consequences for the cryptocurrency industry. Investors should be concerned, because it could significantly impact the way that individuals — both inside and outside America — are allowed to engage with digital assets.

The IRS is proposing an initiative under Section 6045 of the tax code to establish new tax rules for the treatment of cryptocurrency providers. Specifically, the agency is seeking to amend the law to expand the definition of “brokers” to include nearly all crypto-service providers — including, for instance, decentralized exchanges (DEXs) and wallet providers. Those providers would be required to collect personal information from users beginning in 2025, and to begin sending (a still-unreleased) Form 1099-DA to the IRS in 2026. It would be a crypto-focused version of the 1099-MISC.

The IRS’s move to redefine “broker” is not just a regulatory tweak but a fundamental shift that could reshape the entire U.S. cryptocurrency landscape. By potentially including a wide array of cryptocurrency service providers under this definition, the IRS is extending its reach significantly. This expansion means that many more entities involved in digital asset transactions, from wallet providers to small-scale developers, could be required to report user information and transaction details to the government.

Example of a Form 1099-MISC. Source: Glassnode

For users and investors in the cryptocurrency space, this change could translate into increased reporting and compliance obligations — rolling back the anonymity and flexibility they currently offer users. For service providers, it would require the adoption of new systems and procedures for compliance, requiring them to ask users for their personal information. While the IRS is technically attempting to target American users, service providers would have no way to determine nationalities before harvesting user data.

Related: IRS proposes unprecedented data-collection on crypto users

The move would be a decisive step toward bringing the world of digital assets in line with traditional financial systems in terms of regulatory oversight and transparency. It’s crucial that the average American understand the proposal’s implications, because it represents a significant pivot point in how digital assets are perceived and managed by regulators.

The industry’s response

The industry’s response to these regulatory changes has been marked by concern and proactive engagement. Major players have expressed apprehensions about the intrusion into personal privacy, including Coinbase, whose chief legal counsel Paul Grewal, noted the change would “set a dangerous precedent for surveillance of the everyday financial activities of consumers by requiring nearly every digital asset transaction — even the purchase of a cup of coffee — to be reported.”

The broader industry is similarly concerned about the possibility of regulations stifling the growth of digital assets. A primary issue is the appropriate application of conventional regulatory frameworks to decentralized systems, ensuring investor privacy protection and fostering an environment that supports innovation while maintaining market stability.

The change would have profound implications for individual investors and developers within the cryptocurrency realm. For investors, clearer regulatory guidelines could bolster market confidence, potentially leading to increased investment activity. However, excessively strict regulations risk curbing innovation and reducing the appeal of cryptocurrencies as an alternative to traditional financial systems. For developers, especially those in the DeFi sector, these regulatory shifts present both compliance challenges and opportunities to influence the development of rules that recognize the unique capabilities of blockchain technology.

Related: Expect new IRS crypto surveillance to come with a surge in confiscation

Navigating the complexities of these regulatory proposals necessitates a balanced approach. The cryptocurrency industry must proactively engage with regulators to ensure the creation of fair, practical, and innovation-friendly regulations. Balancing regulatory oversight with the preservation of the ecosystem’s core values is crucial for the future of digital finance. The industry’s capacity to adapt to these regulatory changes while retaining its innovative essence is pivotal.

The requirement for regulatory adaptability and industry evolution is more apparent than ever. The cryptocurrency sector is encouraged to evolve its practices to meet emerging regulatory standards while preserving its innovative and decentralized nature. Simultaneously, regulators are challenged to comprehend the unique aspects of digital assets and decentralized systems to devise effective, sensible, and forward-thinking regulations.

Lobbying and political contributions

The cryptocurrency industry’s involvement in lobbying and political contributions has become increasingly significant. In 2022, the industry’s lobbying efforts and political contributions skyrocketed, reflecting its growing interest in shaping regulatory frameworks. This political engagement is a clear indicator of the industry’s commitment to influencing policy decisions that will affect its future. It also highlights the need for a regulatory environment that understands and accommodates the unique characteristics of digital assets and blockchain technology.

Expanding the definition of “broker” would stifle innovation for the industry, but particularly on American soil. The cryptocurrency community’s resilient response, advocating for fair and supportive regulatory measures, underscores the delicate balance between effective regulation and fostering technological progress.

As the industry actively participates in shaping these regulations, its involvement is crucial to ensuring the U.S. cryptocurrency sector continues to thrive in a competitive global landscape, balancing regulatory compliance with innovation and growth.

Tomer Warschauer Nuni is the chief marketing and business development officer at Pink Moon Studios. With more than two decades of experience in tech, gaming, and blockchain, Tomer is an adept early-stage investor and startup advisor for projects including ChainGPT and GT-Protocol. He holds degrees in governance and communication from Reichman University.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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Budget 2024: Rishi Sunak hints at further national insurance tax cut – citing boost for union

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Budget 2024: Rishi Sunak hints at further national insurance tax cut - citing boost for union

A reduction in national insurance would be a “union tax cut”, the prime minister has said ahead of the budget next week.

Rishi Sunak told journalists at the Scottish Conservative conference in Aberdeen on Friday that while he could not comment on what the chancellor Jeremy Hunt will announce on 6 March, he could see the case for trimming the levy – which is paid by workers across the UK – over income tax.

When asked about the fact a cut in the headline rate of income tax may not benefit voters in Scotland if the SNP government chooses not to pass it on, he said national insurance had been cut in January because it is a “tax on work” and benefits all parts of the nation.

Politics latest: PM delivers Downing Street address

“I’m sure people will appreciate that I can’t comment on any fiscal policy in advance of the budget,” he said.

“But to your broader point, the chancellor and UK government chose to cut national insurance, for lots of reasons but first and foremost because it’s a tax on work and I believe in a country and society where hard work is rewarded.”

He added: “It’s also important to us to be a government that delivers for people in every part of the United Kingdom.

“It’s a union tax cut and a tax cut for everyone in work and the contrast between what we’re doing and what the SNP are doing couldn’t be starker.

“I want to make life easier for people, I want to give them the peace of mind there’s a brighter future for them and their families.”

Jeremy Hunt, pictured at last year's budget, is under pressure to deliver for his parties electoral hopes
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Jeremy Hunt will give his budget on 6 March

Some Conservative MPs have been pushing for a pre-election cut to income tax in the hope of boosting the Conservatives’ flagging popularity.

It was also one of the promises of Mr Sunak’s leadership campaign.

Read more:
What to expect in the budget – from tax cuts to vaping duty

Car industry demands budget aid to get electric vehicle sales back on track

In Scotland, where the Conservatives are up against the SNP in all of the seats they hold and are targeting, the prime minister has dubbed the SNP the “high tax capital of the United Kingdom”, with Scots earning around £28,000 a year already paying more income tax than those who live in England due to policy decisions at Holyrood.

MSPs passed the final budget for the next financial year this week, including a new income tax band being created, which will see those on a salary between £75,000 and £125,140 paying 45%; while a 1% increase to the highest rate of tax – for those earning more than £125,140 – will take it to 48p in the pound.

In passing the budget, deputy first minister Shona Robison insisted Scotland’s tax system was “progressive” and will provide £500m in funding for the NHS.

Scotland Secretary Alister Jack confirmed he had been lobbying the chancellor for a cut in national insurance – rather than income tax.

Mr Sunak would not comment on reports the government is considering raising revenue by increasing the windfall tax on oil and gas companies, or may force “non-doms” to pay UK tax on foreign income – both ideas Labour has put forward.

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PM rails against ‘extremist forces trying to tear us apart’ in Downing Street address

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PM rails against 'extremist forces trying to tear us apart' in Downing Street address

Rishi Sunak has railed against “extremist forces trying to tear us apart” during a Downing Street address to the nation.

The prime minister said there has been a “shocking increase in extremist disruption and criminality” and added that “now our democracy itself is a target”.

Politics latest: Galloway reacts to PM saying result ‘beyond alarming’

He also described the Rochdale by-election result on Thursday night as “beyond alarming”, and claimed “our streets have been hijacked by small groups who are hostile to our values” as he urged the need to “beat this poison”.

His surprise speech came after the victory of maverick politician George Galloway in the Greater Manchester seat, following a campaign dominated by the highly-emotive issue of Gaza and dogged by accusations of abuse and intimidation.

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Rochdale MP: ‘I despise the prime minister’

In response, Mr Galloway told Sky News he “despised” the prime minister and did not care what he thought as he had won “a free and fair election”.

Community tensions in the UK have heightened against the backdrop of the Israel-Hamas conflict, triggered by the militant attack on 7 October.

In the face of ongoing pro-Palestinian protests, MPs have spoken of their experiences of receiving death threats and their concerns for the safety of their families, prompting the government to announce an extra £31m to protect elected representatives.

It followed chaotic scenes in Westminster over the vote on a ceasefire in Gaza, when Commons Speaker Sir Lindsay Hoyle broke with precedent in his handling of proceedings because he had concerns about the intimidation suffered by some parliamentarians, sparking a backlash.

But critics argue members of the ruling party have stoked divisions, highlighting former deputy Tory chairman Lee Anderson being stripped of the party whip after he accused London mayor Sadiq Khan of being controlled by Islamists, and former home secretary Suella Braverman referring to protests as “hate marches”.

Read more:
From bodyguards to death threats – the real impact of chaos in the Commons

Mr Sunak said: “In recent weeks and months, we have seen a shocking increase in extremist disruption and criminality.

“What started as protests on our streets have descended into intimidation, threats and planned acts of violence.

“Jewish children fearful to wear their school uniform lest it reveals their identity. Muslim women abused in the street for the actions of a terrorist group they have no connection with.

“Now our democracy itself is a target. Council meetings and local events have been stormed. MPs do not feel safe in their homes. Long-standing parliamentary conventions have been upended because of safety concerns.

“And it’s beyond alarming that last night, the Rochdale by-election returned a candidate that dismisses the horror of what happened on 7 October, who glorifies Hezbollah and is endorsed by Nick Griffin, the racist former leader of the BNP.”

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Protesters descend on MP’s home

He added: “We are a country where we love our neighbours and we are building Britain together.

“But I fear that our great achievement in building the world’s most successful multi-ethnic, multi-faith democracy is being deliberately undermined.

“There are forces here at home trying to tear us apart.”

He went on: “Islamist extremists and far rights groups are spreading a poison, that poison is extremism.”

Mr Sunak announced a “new robust framework” would be introduced to “ensure we are dealing with the root cause of this problem”.

The prime minister said ministers would redouble their support for the anti-terrorism Prevent programme, demand universities stop extremist activity on campus and act to prevent people from entering the country whose “aim is to undermine its values”.

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What happened in the House of Commons?

In an appeal to those taking part in pro-Palestinian protests, Mr Sunak said: “Don’t let the extremists hijack your marches. You have a chance in the coming weeks to show that you can protest decently, peacefully and with empathy for your fellow citizens.

“Let’s prove these extremists wrong and show that even when we disagree we will never be disunited from our common values of decency and respect.

“I love this country, my family and I owe it so much. The time has now come for us all to stand together to combat the forces of division and beat this poison.”

Labour leader Sir Keir Starmer backed Mr Sunak’s call.

In a statement, he said: “The prime minister is right to advocate unity and to condemn the unacceptable and intimidatory behaviour that we have seen recently.

“It is an important task of leadership to defend our values and the common bonds that hold us together.

“Citizens have a right to go about their business without intimidation and elected representatives should be able to do their jobs and cast their votes without fear or favour.

“This is something agreed across the parties and which we should all defend.”

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Electoral Dysfunction: How big a threat is Galloway and Gaza to Starmer’s Labour?

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Electoral Dysfunction: How big a threat is Galloway and Gaza to Starmer's Labour?

George Galloway will be back in parliament on Monday with his megaphone and a new platform to rail against Labour.

His theme is Gaza and his menace is clear.

As he accepted victory in the Rochdale by-election at around 3.30am (at a rally in a Subaru car showroom of all places), the veteran left-wing agitator warned Sir Keir Starmer “[his] problems just got 100 times more serious than they were before today”.

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In Mr Galloway’s world, his win was the beginning of an earthquake that would flatten Sir Keir’s Labour.

“This is going to spark a movement, a landslide, a shifting of the tectonic plates in scores of parliamentary constituencies,” he said.

Labour, he said, was “on notice that they have lost the confidence of millions of their voters who loyally and traditionally voted for them”.

On Electoral Dysfunction this week Jess Phillips, Ruth Davidson and I discuss how much this disruptor will damage Labour and how big the electoral problem of Gaza is for Sir Keir.

It is something that Ms Phillips, who has a large Muslim community in her Birmingham Yardley constituency, feels very strongly about.

She resigned from the Labour frontbench last year after deciding she couldn’t support the party over the Israel-Hamas war.

And she is fuming over what she sees as Mr Galloway’s sanctimony as he purports to be fighting for the people of Gaza when all he really wants to do is to sock it to Labour, as he has been trying to do in various seats for various political parties since he was kicked out of the party more than 20 years ago.

Read more:
Galloway only won because Labour ditched candidate – Starmer
Starmer should be worried after Galloway win
Who is Galloway, the new MP for Rochdale?

Ms Phillips said: “He is not a legitimate voice for the people of Gaza.

“He’s just trying to attack Keir Starmer.

“Knock yourself out. Attack Keir Starmer. That’s politics. I’m here for that. But don’t pretend to people who care about something that you’re going to change something.”

Mr Galloway would reject the suggestion he is not a “legitimate voice” for the people of Gaza, having campaigned on behalf of the Palestinian cause for decades. Speaking to Sky News in the wake of his victory last night, he said his views on the issue were “quite well known”.

As for whether Labour would have lost this seat to Mr Galloway regardless of whether its suspended candidate Azhar Ali had stood for Labour or not – a view of some in the party – Ms Phillips says she doesn’t know.

But what she does acknowledge is Mr Galloway’s near 6,000 majority is “testament to a broader problem” for the party.

She said: “There is a clear problem with Muslim communities feeling represented currently by the Labour movement.

“Muslim people do not want to be represented by total charlatans.

“They also want to come to you for help and need decent representation and good, good people, both from within and without their community.

“They have been saying for some time, we are losing faith, if only we noticed it.”

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I don’t buy Mr Galloway’s assertion that he is triggering a “movement” across “scores” of Labour seats – not least because these divisions have been in plain sight for months, with councillors and activists quitting Labour because of the tensions over Gaza.

In some Labour seats it is undoubtedly a real problem, but what doesn’t follow is that these difficulties lead to electoral failure in a general election across a number of seats.

The by-election swings in all other races tell a very different story, with over half of Labour’s biggest by-election swings ever happening in the last couple of years.

“Rochdale was the anomaly and not any kind of indication of where we are,” says one senior Labour figure.

“At the beginning of the [Rochdale] campaign it was clear that some previous Labour voters had moved away from us on the issue of Gaza but at the same time we were picking up a lot of previous Tory voters.”

While Ms Phillips is clearly frustrated with her party leadership over Gaza, Ms Davidson says she feels “a little bit sorry” for Sir Keir, who she thinks had no option but to be fulsome in support of Israel against the backdrop of a Labour party that had been so badly tarnished by the rows over antisemitism in its ranks during the Jeremy Corbyn years.

“I think what the Gaza situation thing has exploded about is the fact that Keir Starmer had so much work to do off of Jeremy Corbyn to try and rebuild trust with Jewish communities across this country,” says Ms Davidson.

“He had to do that if he was going to be a credible candidate for the prime minister of this country; he had to make that reparation.

“And that is now being used against him. The bit [from Galloway’s election flyers], which was about Starmer being this great friend of Israel, is being used as a stick to beat him with.”

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