COINBASE RALLIES CRYPTO COMMUNITY TO SPEAK OUT ON PROPOSED IRS REGULATIONS
IRS proposed crypto reporting regulations treat cryptos far differently than other asset classes. The regulations seemed designed to damage crypto adoption in the U.S., says Coinbase, the largest crypto exchange operating there.
During a regulation comment period, when Americans can voice their opinions, Coinbase helped spur crypto sector supporters to speak out and send comments to the agency.
The IRS acknowledged heavy interest from the public in commenting on the crypto rules, and extended the comment period by two weeks from its original 25 October deadline, as noted by Blockworks.com. (“IRS extends crypto tax rule comment period after “strong public interest,” 24 Oct 2023.)
A Coming Morass Born Out of Biden’s Infrastructure Act?
The proposed regulations represent the IRS’s proposals to carry out authorizations in the Biden administration’s 2021 Infrastructure Act.
But Coinbase argues the regulations represent a distortion and overreach of the crypto related goals laid out in the legislation.
In an open letter, the company laid out its specific objections, and noted that it has always welcomed reasonable regulations for cryptos:
“Coinbase supports clear, transparent, and workable rules that govern tax reporting for U.S. taxpayers who trade digital assets on centralized platforms. We have long supported parity for how digital asset transactions are reported with how securities transactions are reported in traditional finance. For many years, and long before passage of the IIJA, we have asked for regulatory guidance around information reporting for digital assets.”
Coinbase listed a number of major objections in the letter, including:
- Lack of Parity with Financial Services
- Duplicative and Burdensome Reporting
- Invasion of Privacy
- Violation of Tech Neutrality.
Regarding lack of parity in the treatment of crypto reporting, compared to traditional finance and asset classes, Coinbase argued:
“By expanding the universe of brokers and scope of digital assets to include any and all persons who facilitate the digital asset economy, the IRS and taxpayers will be bombarded with data, including data related to payment transactions and transactions without any gain or loss. We estimate that the IRS will receive billions of annual filings (with zero or negligible taxable income) if broker reporting is expanded to include stablecoins and other everyday transactions arising from the growing use cases for digital assets.”
The company argued the regulations also represented unprecedented and unacceptable invasion of citizen privacy:
“The Proposed Regulations require the reporting of data related to everyday use cases for digital assets and to digital assets that are non-financial in character. This includes the use of digital assets for everyday uses, such as the purchase of a cup of coffee or everyday payments at the grocery store or visits to the doctor. This expansion of the broker reporting regime increases government oversight over taxpayer activity and intrudes unnecessarily into the private lives of ordinary Americans in ways that are largely unconnected to tax. The IRS should not police every digital asset transaction just because of the potential for taxable gain. The broker reporting regime should not be extended to digital asset transactions where there is no gain, such as payments, and where the assets are non-financial in character.”
The IRS regulations have proposed a new form for crypto brokers, “Form 1099-DA,” for the reporting of non-employment income from digital assets.
The form would have to be filled out by all crypto customers and clients.
The IRS contends the form is to “help” taxpayers in managing their tax obligations.
But it’s just one example of an onerous and intrusive “crypto only” tax reporting regulation regime, Coinbase has argued.