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- Coinbase CEO Brian Armstrong and his exchange have raised an alarm on the recent IRS crypto tax proposal deeming it as ‘incomprehensible.’
- The IRS has proposed defining crypto brokers and instructing their customers on how to pay taxes.
A new U.S. Internal Revenue Service (IRS) crypto taxing proposal has been raising concerns across the crypto community. The same has raised concerns from the biggest cryptocurrency exchange in the U.S., Coinbase. In response, the publicly traded exchange has written to the agency a letter that highlights issues identified by the exchange and how the new tax proposal would hinder the adoption and development of the cryptocurrency market.
According to the exchange, the new rules would infringe on Americans’ financial privacy noting that it represents “an unprecedented, unchecked, and unlimited tracking on the daily lives of Americans.” The letter from Lawrence Zlatkin, the vice president of tax for Coinbase Global Inc. goes on to note;
These rules would establish an incomprehensible and unduly burdensome set of new reporting requirements that will degrade and displace the same taxpayer services the IRS is seeking to improve,
With this letter, Coinbase is asking the IRS “to limit compliance requirements to those parties that directly effectuate transactions in digital assets similar to those in traditional finance.”
Just hours before the exchange sent the letter, the IRS was already making comments about the crypto industry and what it regards as a “tax gap.” The exchange highlights the crypto industry as a growing problem noting that the agency has often fallen short of projections of the amount it expects to collect from the industry.
Regulators Pushing for Crypto Tax
Notably, Sen. Elizabeth Warren and other democratic senators had earlier this week written to the IRS asking the agency to repudiate industry complaints and concerns. In the letter, the senators say any delays in the enactment of the rules would disadvantage law-abiding Americans, and cause the federal government to lose out on billions of dollars in tax revenue. The senators are now asking the agency to impose the rule “as swiftly as possible.”
Earlier this year, the Treasury Department published a proposed rule, calling on reporting obligations for centralized crypto exchanges, payment processors, some hosted wallet providers, some decentralized exchanges, and people or entities that redeem crypto tokens.
It is clear that there are two opposing sides with one looking to expand and promote the industry while the other views the industry as an issue and a means for criminals to circumnavigate traditional financial rules.
The agency now has until October 30th to evaluate the comments received before moving forward with a final decision.
