Coinbase Concerned About New IRS Tax Proposal: It will Endanger the Industry and User Privacy

Updated: 13 October 2023

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Coinbase, the largest US crypto exchange, has expressed concerns about the new crypto tax proposal created by the Internal Revenue Service (IRS).

As CoinDesk reported, the new rule would require newly designated brokers to report sales and exchanges of digital assets.

The law would not include miners and stakers, but experts believe it would still negatively affect all aspects of the crypto industry.

JUST IN: #Coinbase is expressing opposition to a recent proposal put forth by the U.S. Internal Revenue Service (IRS).

They argue that this proposal has the potential to put the #crypto industry at risk and compromise the privacy of Americans.

— Crypto Headlines 📜 (@Idreesahmadjr) October 12, 2023

IRS Presents Long-Awaited Proposal, and It Will Only Harm the Crypto Industry

Two years ago, the Infrastructure and Jobs Act (IIJA) passed a bill that obligated broker information reporting to digital asset transactions in the US.

The IRS was put in charge of implementing the statute. In late September, the US tax authority finally completed the proposal, which appears to be more damaging than expected.

The IRS’ proposal expanded the definitions of “broker” and “digital assets.” As a result, even those who were not supposed to be caught up in the scope of tax reporting obligations will now be pulled into it.

Furthermore, the new brokers would have to collect and report the users’ personal information, including names, addresses, and tax identification numbers, as per CoinDesk. Users would then have to calculate gains and losses for the digital asset sales.

Coinbase objected to the proposal, arguing that the rules could infringe on Americans’ privacy rights and lead to overly burdensome reporting requirements.

Coinbase, the largest cryptocurrency exchange in the United States, has written to the Internal Revenue Service (IRS) stating that its recent cryptocurrency tax proposal will endanger the privacy of the industry and Americans.

— ice_ambassador⛄️ (@qngtian456) October 13, 2023

The proposal will ruin DeFi in the US

The proposal has raised numerous concerns, especially regarding security, privacy, and the ability to access decentralized protocols. Coinbase believes it could harm the crypto environment, as it would create an unworkable reporting requirement for many participants. It would also introduce invasive government surveillance into Americans’ daily activities.

Crypto projects would also be heavily impacted. Some projects would likely have to either move out of the country or shut down, further damaging blockchain-related innovation in the US.

CoinDesk argues that this would have catastrophic consequences for the decentralized use of crypto assets, as compliance would be impossible due to the lack of a central point of control.

IRS needs to clarify the proposal for better understanding and compliance.

— Emerson Karen (@EmersonKar69589) October 13, 2023

The report concluded that the proposal, in its current form, will mark the end of the DeFi sector in the United States. Once again, the US lawmakers show that they would rather destroy the local crypto industry than help it thrive, which is likely to have negative economic consequences in the long term.

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