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IRS crypto tax reporting rules threat to industry

Mike Ring
October 19, 2023

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Coinbase Chief Legal Officer Urges Crypto Community to Oppose Proposed Tax Regulations

Coinbase crypto exchange chief legal officer Paul Singh Grewal called upon the crypto community to join the movement against the United States Treasury’s proposed tax reporting regulations on cryptocurrencies. Grewal urged the crypto community to oppose the proposed regulations as they could set a dangerous precedent for surveillance.

Grewal took to X (formerly Twitter) to voice his concerns associated with the proposed crypto tax reporting rules and claimed that the proposed regulations go beyond the congressional mandate to establish tax reporting rules. He added that if the proposed regulations become a law, it could put digital assets at a disadvantage and threaten to harm a nascent industry just as it’s getting started.

Why the Proposed Regulations are Problematic

The Internal Revenue Service (IRS) released a draft of proposed regulations for crypto tax reporting on Aug. 25. Under the proposed rules, crypto brokers would be required to use a new form to report their transactions in order to simplify tax filing and cut down on tax cheating. The proposed regulations include both centralized and some decentralized exchanges, crypto payment processors, and certain online wallets as crypto brokers.

The Treasury Department claimed that the new form would simplify the tax filing process as it would help taxpayers determine if they owe taxes rather than having to make complicated calculations or pay digital asset tax preparation services to file their tax returns. If approved, the new tax regime will come into effect from 2026 and the brokers will be required to start reporting 2025 transactions in January 2026 via Form 1099-DA.

Coinbase Chief’s Response

Coinbase’s chief legal officer insists that the proposed regulations do not put digital assets in line with traditional financial reporting. Grewal said that the proposed rules would set a “dangerous precedent for surveillance of the everyday financial activities of consumers by requiring nearly every digital asset transaction – even the purchase of a cup of coffee – to be reported.”

Grewal noted that the proposed regulations would require the collection of a significant amount of user data that bears no “legitimate public purpose.” He added that the data collection would overburden Web3 startups with costly requirements while offering the “IRS with more data than they can ingest and analyze.”

Join the Movement

Coinbase’s legal officer called upon the community to join the movement against the proposed crypto tax reporting rules. He urged everyone who cares about fairness and supports American innovation to chime in on Treasury’s proposed regulations for tax reporting of digital assets. You can join @StandwithCrypto’s opposition to the rulemaking here.

For expert assistance in managing your crypto tax obligations and to experience the peace of mind that comes with precise tax filing, don’t forget to explore our cutting-edge crypto tax preparation service. Your financial clarity and confidence start here.

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