The IRS finalized its controversial Broker Rule, mandating that all cryptocurrency exchanges, both custodial and non-custodial, adhere to Know-Your-Customer regulations. Notably, the rule stipulates that custody of funds is not required to be classified as a broker, thus imposing reporting requirements on developers of trading interfaces. This aligns with the Financial Action Task Force's guidelines, placing developers under anti-money laundering obligations. The IRS expands the definition of control to encompass various aspects of trading services, significantly broadening the regulatory net over digital asset transactions.
The IRS's new Broker Rule requires all cryptocurrency exchanges to comply with Know-Your-Customer measures, impacting both custodial and non-custodial services.
Under the Broker Rule, developers of trading interfaces will be classified as Virtual Asset Service Providers, subject to anti-money laundering regulations.
The ruling implies that developers exert control over trading services, even without direct custody of digital assets, aligning with FATF guidelines.
The definition of control includes abilities like amending services, collecting fees, and confirming transactions, extending regulatory requirements to front-end service providers.
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