Launchy Regulatory Roundup #21- IRS Grants Temporary Relief on Crypto Cost-Basis Rules

Operation Chokepoint 2.0 Investigation Proposal | China Tightens Crypto Oversight

Marco Manoppo & Muhammad Reynaldi Ariananda Arkiang
January 05, 2025

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Welcome to our 21st edition of the regulatory roundup. If you know anybody who would benefit from this content, please help us spread the word!

Good Morning,

For a moment, it seemed the IRS was ready to launch “Taxpayer Gymnastics,” forcing crypto investors to backflip through FIFO hoops. Luckily, the pause button was hit, but it’s a stark reminder to stay nimble, the rules are always changing.

In Today's Edition:

Headline: IRS Grants Temporary Relief on Crypto Cost-Basis Rules 🇺🇲
Global Legal Roundup: China Tightens Crypto Oversight 🇨🇳 , Swiss’s Bitcoin Holding Proposal 🇨🇭
Case Study: Operation Chokepoint 2.0 Investigation Proposal 🔍️

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HEADLINE

IRS Grants Temporary Relief on Crypto Cost-Basis Rules

img: DDTC

State of play: The IRS has announced temporary relief for a rule that would have required CEXs to default to the FIFO (First In, First Out) accounting method when reporting sales for investors who do not choose a preferred method, such as HIFO (Highest In, First Out) or Specific Identification.

FIFO assumes the oldest cryptocurrency bought is sold first, potentially increasing taxable capital gains during a bull market.
This relief, effective until Dec. 31, 2025, gives brokers time to support alternative accounting methods and allows crypto investors to maintain their records in the interim.
Shehan Chandrasekera from CoinTracker warned that enforcing the rule immediately could have resulted in unintended higher taxes for investors selling assets on a low-cost basis.

What’s Next: These broader rules will take effect in 2027 and require brokers to report detailed taxpayer information and gross proceeds from digital asset sales.

Why it Matters: The update follows a Dec. 28 lawsuit by the Blockchain Association and the Texas Blockchain Council against the IRS, arguing that the expanded broker reporting requirements, including for DEXs, are unconstitutional.

Our Take: The IRS’s temporary relief is a welcome reprieve for crypto investors and brokers, as defaulting to FIFO could have significantly increased taxable capital gains during a bull market.

GLOBAL LEGAL ROUNDUP

America:

🇺🇲 Judge pushes CFTC trial with Gemini to Jan. 21.
🇺🇲 US crypto execs express hope for regulatory clarity in 2025.
🇺🇲 Do Kwon pleads not guilty to draud following extradition to US.
🇺🇲 Trump-Backed Mike Johnson re-elected Speaker of the House.
🇺🇲 Celsius to appeal order that disallowed its $444M claim against FTX.
🇧🇷 Binance secures 21st global crypto license in Brazil

Europe:

🇬🇧 Illegal crypto ads prevail in UK despite FCA warning.
🇨🇭 Proposal mandating the Swiss National Bank to hold Bitcoin now underway.

APAC:

🇨🇳 China tightens crypto trade oversight with new forex rules.

World:

🌐 Tron's & Tether’s T3 Financial Crime Fighting Unit hits $100M in frozen USDT

CASE STUDY

Operation Chokepoint 2.0 Investigation Proposal

As a former prosecutor and Special Assistant United States Attorney I am very serious about volunteering to help lead a federal investigation into ChokePoint 2.0. I would accept the task without salary. The American people deserve the truth a hell of a lot more than I or anyone… x.com/i/web/status/1…
— John E Deaton (@JohnEDeaton1)
7:05 PM • Jan 4, 2025

State of play: Pro-crypto lawyer and former US prosecutor John Deaton has proposed to lead an investigation into the alleged Operation Chokepoint 2.0 under the incoming Trump administration.

Deaton argued that failing to challenge such actions would set a dangerous precedent, enabling regulatory bodies to suppress disfavored industries, stifle innovation, and undermine institutional integrity.

Deaton stated that this is not just a battle for the crypto industry but a broader fight against unchecked bureaucratic power.
He offered to undertake the investigation without salary, stressing the American public’s right to transparency over political agendas.
Deaton’s proposal coincides with a court order permitting Coinbase to access unredacted FDIC documents potentially linked to the alleged initiative.
Operation Chokepoint 2.0 is rumoured to have pressured banks to cut ties with crypto firms, contributing to the collapse of crypto-friendly banks like Silvergate and Signature in 2023.
The effort’s alleged architect, FDIC Chair Martin Gruenberg, resigned in November.

Our Take: While these allegations remain unconfirmed, the timing of Deaton’s proposal alongside Coinbase’s access to FDIC documents presents an opportunity to examine the issue objectively.

His call to action could shape the future relationship between emerging industries and US regulators, ensuring fairness while balancing oversight and innovation.

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NOTEWORTHY READS & MEME

Galaxy’s report on IRS broker rule.
Alex Thorn’s speech on Bitcoin and American values.
Bitcoin Policy Institutes’s thread on the DOJ vs. Samourai Wallet.

the whitepaper vs the product
— rwlk (@sherlock_hodles)
7:49 PM • Dec 6, 2024

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.