The proposed regulations would require brokers of digital assets to report certain sales and exchanges. The proposed regulations would clarify and adjust the rules regarding the tax reporting of information by brokers, so that brokers for digital assets are subject to the same information reporting rules as brokers for securities and other financial instruments.

Under the proposals, brokers would be required to provide a new Form 1099-DA to help taxpayers "determine if they owe taxes, and would help taxpayers avoid having to make complicated calculations or pay digital asset tax preparation services in order to file their tax returns."

The proposed regulations would also require real estate reporting persons, such as title companies, closing attorneys, mortgage lenders and real estate brokers, who are treated as brokers for dispositions of digital assets, to report the disposition of digital assets paid as consideration by real estate purchasers to acquire real estate in real estate transactions that close on or after Jan. 1, 2025. These real estate reporting persons would also be required to include on Form 1099-S the fair market value of digital assets paid to sellers of real estate in real estate transactions that close on or after Jan. 1, 2025.

According to the Treasury press release, these regulations "align tax reporting on digital assets with tax reporting on other assets, and, as a result, avoid preferential treatment between different types of assets." 

The first year that brokers would be required to report any information on sales and exchanges of digital assets is in 2026, for sales and exchanges in 2025.  

The proposals form part of the Biden Administration’s implementation of the bipartisan Infrastructure Investment and Jobs Act.

Commenting on the publication, IRS Commissioner Danny Werfel said: "These proposed regulations are designed to help end confusion involving digital assets and provide clear information and reporting certainty for taxpayers, tax professionals and others. A key part of this effort fits in with the larger IRS compliance focus on wealthy taxpayers. We need to make sure digital assets are not used to hide taxable income, and the proposed regulations are designed to provide a clearer line of sight into activities by high-income people as well as others using them. We want to make sure everyone pays what they owe under the tax laws, and our research and experience demonstrate that third-party reporting improves compliance. We welcome comments on these proposed regulations as we work to finalize the rules in this complex and evolving area."

The deadline for comments is 30 October 2023. A public hearing has been scheduled for 7 November 7 2023, with a second public hearing date for 8 November 8 2023 if the number of requests to speak at the first hearing exceed the number that can be accommodated in one day.

The letter said:

"We thus strongly encourage the Treasury Department to utilize private sector innovations such as blockchain and DLT to support the necessary functions of government to distribute and track relief programs and direct that all guidance support the use of technology to facilitate delivery of CARES Act benefits. Such steps will ensure both that America retains its technological advantage and that relief is delivered quickly to the small businesses and individuals who need it most."

One of the key findings of the report is that a large majority of investors are aware of cryptocurrencies (85%). Nearly one in five (18%) are considering investing in ryptocurrencies, and 12% are already invested. While awareness is consistent across age groups and portfolio values, younger investors (ages 18 to 34) and those with portfolios of less than $50,000 are much more likely than average to consider cryptocurrency investments and invest in them.

In a speech at the Fintech Forward conference, Chairman Heath T. Tarbert said that LabCFTC will now be making its own way and report directly to him.

Established in 2017 within the Office of General Counsel under then Chairman Christopher Giancarlo, LabCFTC was designed to be the focal point for the agency to engage with the FinTech community and promote responsible innovation, the Chairman said.

He added:

“Blockchain, digital assets, and other developments hold great promise for our economy. Now is the time for LabCFTC to play an even greater role as we work to develop and write the rules for these transformative new products. That reality requires engagement at the highest levels within the CFTC, which is why I am elevating LabCFTC to be an independent operating office of the agency and a direct report to me.”

LabCFTC is currently led by Melissa Netram, who previously served as a policy and regulatory affairs executive at Silicon Valley-based Intuit.

Netram said:

“Progress depends on how well regulators respond to financial innovation. LabCFTC is at the forefront of exploring and examining the value of innovation in our financial markets and making our agency accessible to fintech innovators. I’m excited to be a part of the agency and believe the elevation of the office speaks to the value and commitment the Chairman is placing on fostering innovation at the CFTC.”

Also at the conference, LabCFTC released a primer on artificial intelligence in financial markets, as an educational tool for market participants, consumers, and the public.

“AI’s power to analyze vast pools of data to detect patterns and generate insights presents great opportunities to enhance the integrity of our derivatives markets,” added Netram.

Blockchain had enormous potential to transform the markets, he argued. And just as the founding members of the UN had spoken with great optimism in 1948, they should also embrace its potential to transform the world for the better. However, any form of transformation does necessarily proceed in a straight line, and the challenge is to ensure innovation is fostered in a beneficial rather than harmful way. 

At the CFTC, he said, they had been on the frontline working with regulators across the USA offering advice and insights and ensuring these structures remain transparent and free from manipulation. 

Because regulation had often been behind the curve, he argued it had failed to keep up with developments in the space which meant some countries had decided to outlaw them altogether. Even so, he warned, these technologies are not going away and some smaller countries may depend on them.

"We are witnessing a technological revolution and, perhaps, a modern miracle," he said.