Pro-XRP Lawyer John Deaton Comments On New Crypto Tax Rule

Pro-XRP attorney John Deaton has rebuked a newly finalized crypto tax reporting rule issued by the Biden administration. The rule, titled “Gross Proceeds Reporting by Brokers that Regularly Provide Services Effectuating Digital Asset Sales,” was recently introduced by the IRS. Deaton has labeled the regulation as detrimental to decentralized finance (DeFi).

Pro-XRP Lawyer John Deaton Criticizes New IRS Rules

Following a recent announcement by the Internal Revenue Service (IRS), John Deaton has raised concerns over the newly finalized crypto tax regulations. The rules require brokers to facilitate digital asset transactions, report gross proceeds, and provide customers with Form 1099. This obligation includes collecting user data such as names and addresses.

Deaton argued that these regulations unfairly target DeFi platforms. He emphasized that autonomous and permissionless smart contracts cannot comply with such requirements, as they lack centralized control or intermediaries capable of gathering user data.

The lawyer added, 

“Enforcing this kind of requirements on DeFi will stifle innovation and continue to drive developers and projects offshore.”

Additionally, most recently the crypto advocate criticized Senator Elizabeth Warren for her anti-crypto stance and alignment with the banking industry. He argued that Warren’s influence on financial policies and strict crypto regulations stifled industry growth. Also, Deaton accused Senator Elizabeth Warren of being a primary lobbyist for the banking industry over the past decade.

Impact of Reporting Obligations on Decentralized Finance

The rule imposes broker-like responsibilities on front-end service providers interacting with users and offering decentralized protocol access. However, the regulation excludes the DeFi protocols themselves from reporting requirements. Critics, including John Deaton, believe this creates operational challenges for entities in the DeFi ecosystem.

Deaton compared the new regulation to a previous legislative effort by Senator Elizabeth Warren, which he described as a de facto ban on self-custody for Bitcoin. He stated that the rules undermine decentralization and user privacy, both fundamental to DeFi’s core principles.

Moreover, John Deaton noted that such regulations will drive developers and projects offshore, away from the United States. This shift, according to Deaton, could hinder the growth of the digital asset industry domestically.

Furthermore, he suggested that these last-minute rules might be intended to counteract the next administration’s potential pro-crypto stance.

The finalized regulations are set to take effect on January 1, 2027, giving the industry a window to adapt. The IRS has clarified that these rules aim to bring DeFi brokers under the same tax reporting obligations as traditional securities brokers. The crypto advocate urged the new Congress to prioritize reversing these rules, citing their potential to harm DeFi innovation.

Deaton comments come amid Donald Trump pledge to make the U.S. the crypto capital by ensuring all remaining Bitcoin is “made in the USA.” However, with 95% of Bitcoin already mined and the introduced crypto tax, this goal faces some challenges.