In Wake Of FASB Decision, Taxes And Compliance Take Centerstage With DeFi

IRS Taxes and Reporting

Tax reporting, compliance and DeFi, oh my!

Two weeks ago, The Financial Accounting Standards Board (FASB) agreed to take up a new review of accounting and disclosure standards for digital assets. The blockchain industry hailed it as a needed addition to FASB’s “technical agenda” and an indication of further acceptance of what the standards board calls “plain vanilla” cryptocurrencies – Bitcoin and Ether.

At last week’s Permissionless conference, Miles Fuller, a former IRS employee and current Head of Government Solutions for TaxBit, echoed industry frustration with today’s reporting standards saying in a discussion with Chamber of Digital Commerce’s Perianne Boring, “You need your balance sheet to be a full reflection of reality.”

As late as October 0f 2020, the not-for-profit accounting standards board, which guides all publicly traded companies such as digital asset holders Tesla and MicroStrategy, said that if the value of Bitcoin goes down, for example, a company must record the decrease in assets on its balance sheet on an annual basis. But if it goes up, the same companies only get to record a gain if the assets are sold.

TaxBit’s Fuller expanded the reporting pain point to the IRS and its intersection with decentralized finance (DeFi) noting how – as a former insider at the IRS – the agency was close to providing guidance to consumers on tax compliance with digital assets, but then Congress got in the way. Fuller added, “Sometimes I hear people put the onus on the IRS, but it’s Congress – the IRS is just trying to administer it.”

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