Top crypto exchange Coinbase has expressed what it calls “serious concerns” about the new tax rules proposed by the IRS.
The exchange in a 14-page letter to the Internal Revenue Service on Thursday detailed its concerns about the “nature and scope” of proposed tax regulations related to gross proceeds and basis reporting for digital asset transactions.
Coinbase referred to the rules proposed by the IRS back in August, saying the requirements would establish an “incomprehensible and unduly burdensome set of new reporting requirements.” Coinbase also added that the rules are “overly broad in ways that are not warranted or implementable.”
“We have long advocated for a tax system that treats digital assets the same way it treats assets in traditional finance,” the crypto exchange told the U.S. tax authority.
“The proposed regulations, as written, would impose an unprecedented, unchecked, and unlimited tracking on the daily lives of Americans. They would enable government surveillance of the choices Americans make about their most private health care decisions, or even when they purchase a cup of coffee,” the exchange added.
Coinbase listed six observations that are linked to their objection, including lack of parity with financial services, duplicative and burdensome reporting, invasion of privacy, violation of tech neutrality, unrealistic compliance timeline, and missed opportunity to leverage blockchain to ensure taxpayer compliance.
“This overbreadth will counterproductively make it harder for the IRS to enforce the tax laws on cryptocurrency transactions involving U.S. persons,” Coinbase wrote.
Senators Push for Rules
Coinbase is objecting to the new tax rules put forward by the IRS. However, the IRS has backing from a group of democratic senators who are pushing for the IRS to advance the tax reporting requirements for crypto brokers as quickly as possible, one of which is Sen. Elizabeth Warren.
“Limiting any further delay in the implementation of the Administration’s proposed rule would combat industry efforts to evade regulation, provide clarity to law-abiding taxpayers, and generate billions in tax revenue from a chronically tax-avoidant industry,” Sen. Elizabeth Warren, D-Mass, and others said in a letter dated Oct. 10.
The IRS remains open to comments until Oct. 30, and a public hearing has been set for Nov. 7, while Coinbase intends to provide more detailed observations and technical comments it plans to send in another letter.
Coinbase’s Fight for Fairness Towards Crypto
Coinbase has faced regulatory challenges in the U.S, particularly from the securities and exchange commission (SEC). However, the exchange has also been fighting for the crypto space in general.
Apart from this objection to the tax reporting rules put forward by the IRS, Coinbase has filed a suit against the SEC, demanding that it brings clarity to crypto regulation in the U.S or leave the industry alone.
This filing hasn’t yielded much so far, as the SEC insists that the crypto industry has sufficient guidance to do the right thing. However, it has raised awareness on the state of regulation in the country, thus emboldening other crypto companies to fight back, such as Grayscale, Ripple, and Binance.
It is also because of this filing that lawmakers are now working hard to create legislation for proper regulation of the industry. Hopefully when such regulation is in place, it will answer many questions, including the tax reporting requirement issue that has led to the current objection.
