Coinbase cryptocurrency exchange is raising concerns about a recent proposal introduced by the U.S. Internal Revenue Service (IRS) Crypto Tax.
The exchange believes that this proposition could pose a threat to the cryptocurrency industry and jeopardize the privacy of American citizens.
Recently, the IRS introduced a regulation aimed at formally defining cryptocurrency brokers and providing them with guidance on ensuring proper tax compliance for themselves and their clients.
However, in a letter submitted to the agency on Thursday, Coinbase expressed its concerns about the proposed rule. They stated that it could lead to “an unparalleled, unregulated, and boundless surveillance of the daily lives of Americans.”
IRS Proposal Sparks Concerns from Coinbase and the Blockchain Association
In the letter, Lawrence Zlatkin, the Vice President of Tax at Coinbase Global Inc., expressed his concerns. He stated that these regulations would establish an intricate and excessively burdensome set of novel reporting prerequisites. Ultimately, this could erode and supplant the same services that the IRS intends to enhance.
The Blockchain Association, a U.S. cryptocurrency advocacy organization, had previously argued that adopting these provisions could potentially stifle the cryptocurrency industry within the United States.
Just before Coinbase’s letter, the IRS addressed concerns about the cryptocurrency industry’s impact on tax revenues. They estimated a “tax gap,” which identifies the amount of tax revenue the agency should be receiving but is not.
This estimate acknowledged that cryptocurrencies contribute to this issue, particularly concerning noncompliance in areas related to digital assets and cryptocurrency.
IRS Crypto Tax Regulations and Concerns: A Comprehensive Overview”
In August, the Treasury Department released a comprehensive 300-page proposed rule. This rule was designed to align with the 2021 Infrastructure Investment and Jobs Act. The proposal outlines several key reporting obligations.
The proposal outlines reporting obligations for centralized cryptocurrency exchanges, payment processors, and specific hosted wallet providers. It also includes selected decentralized exchanges and individuals or entities engaged in the redemption of cryptocurrency tokens.
Senator Elizabeth Warren (D-Mass.) and other Democratic senators took action this week. They penned their own letter to the Internal Revenue Service(IRS). In this letter, they advised the agency to reject industry complaints.
The lawmakers’ primary concern was that the proposed rules might take too long to be implemented. This could put law-abiding Americans at a disadvantage and cause the federal government to lose out on billions of dollars in tax revenue.
Contrasting Views on U.S. Crypto Regulation and IRS Review Deadline
As a solution, the senators recommended that the rule be put into effect as quickly as possible.
Coinbase, on the other hand, had a different perspective. They urged the IRS to revise the proposal. Their suggestion was to confine compliance requirements to those entities directly facilitating transactions in digital assets. This approach would be similar to those in traditional finance.
The agency must review the public comments it receives. This review is essential before its October 30 deadline. The purpose is to consider a final rule.