Thread by @fubuloubu

I think I've figured out why no one wants to give up potentially classifying devs as brokers, no matter how much they say they won't prosecute: They think DeFi devs are the critical piece to implement 1099 reporting in DeFi dapps

I don't think this is a completely unreasonable request (while it is an unreasonable demand IMO), because right now figuring cost basis for tax reporting is a ridiculously hard problem.

Just ask @rotkiapp

Every application has different semantics to what constituted a "trade" vs. a collateralized loan vs. a like-kind conversion. US law doesn't help make it clearer either. I'm sure there are similar difficulties in other jurisdictions.

We need "semantic web" for DeFi.

What if there was a standardized way for each DeFi application to talk about the actions you took using their protocol, so that holistically, across many thousands of transactions and applications, you could easily figure out what your cost basis, PnL, fees, etc. is?

I would think that this would be enough to standardize reporting and increase revenue from improper reporting due to not understanding what's what. We have the data, use it!

I think this kind of self-regulation would have a much better outcome than letting it be dictated to us.

Honestly, what @senrobportman et al should be concerned with now is working *with* industry to understand the complexities of current law that lead to improper reporting. The way these apps are built, devs won't be able to issue 1099s without significantly breaking how they work.

However, we can easily provide *the tools* to make compliance of each individual trader to their preferred tax reporting jurisdiction as easy as possible, and this should improve reporting and increase revenues (which is the goal), and prevent onerous reqs from killing innovation

There's a lot of facets to this, which is why I'm in favor of just completely killing the whole debate, scrapping that amendment, and replacing it with having the IRS produce a report on what's needed to improve tax reporting and enforcement in order to close the budget gap.

Arguing about who is a broker and who isn't completely misses the point: tax compliance in Crypto is extremely difficult, and improving it should add a decent amount of revenue to that can be used for the infrastructure bill (idk about $28b, but we have no real data!)

Ofc, this won't change the game on tax dodgers... But, anyone stupid enough to commit crimes on an immutable public ledger (perfect for evidence gathering) is gonna have a bad time. IMO forcing devs to KYC just to catch a few bad actors is throwing the baby out with the bathwater

Getting this wrong is $100t mistake, and cedes the ground for the final relinquishing of political dominance that the US will have in the era of cryptocurrency.

Embrace open finance built on open software, and you will embrace freedom.