IRS Crypto Tax Reporting Rules Threaten Industry: Coinbase Legal Chief

Coinbase crypto exchange Chief Legal Officer Paul Singh Grewal has called on the crypto community to join the movement against the US Treasury's proposed tax reporting rules on cryptocurrencies. Grewal urged the public to oppose the proposed regulations as it could create a dangerous precedent for surveillance.

Grewal took to X (formerly Twitter) to address the concerns surrounding the proposed crypto tax reporting rules and said the proposed rules go beyond Congress's authority to establish tax reporting rules. He added that if the proposed regulations become law, it will harm digital assets and potentially harm the nascent industry. “

Anyone who cares about equity and supports American innovation should take note of the Treasury Department's guidance on digital assets tax reporting. You can oppose the legislation here @StandwithCrypto. 1/4 https://t.co/4eALt1Frxo

— paulgrewal.eth (@iampaulgrewal) October 18, 2023

The Internal Revenue Service (IRS) On August 25, he released a draft of proposed rules for crypto tax reporting. Under the proposed rules, crypto brokers will be required to use a new form to simplify tax filing and reduce tax evasion. The proposed regulations include both centralized and some decentralized exchanges, crypto payment processors and certain online wallets as crypto brokers.

The Treasury Department's new form simplifies the tax filing process by helping taxpayers determine whether they owe taxes instead of doing complex calculations to file tax returns or paying for digital estate tax preparation services. If approved, the new tax system would take effect beginning in 2026, and brokers would have to begin reporting 2025 transactions on Form 1099-DA in January 2026. However, many US lawmakers have urged the IRS to implement crypto tax reporting requirements before 2026.

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The Treasury Department claims that crypto tax reporting rules place digital assets alongside traditional financial reports, but Coinbase's legal officer insists that's not the case. Grewal, in the X Post, said the proposed rules set a dangerous precedent for monitoring consumers' day-to-day financial activities by requiring the reporting of every digital asset transaction — even the purchase of a cup of coffee.

Coinbase's chief legal officer said the proposed regulations would require the collection of large amounts of user data that do not have a “legitimate public purpose.” Grewal says data collection burdens Web3 startups with expensive requirements, providing “more data than the IRS can input and analyze.”

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