Coinbase (COIN), the biggest U.S. crypto exchange, is arguing that a recent proposal from the U.S. Internal Revenue Service (IRS) will endanger the industry and Americans’ privacy.
The IRS had proposed a rule recently to formally define crypto brokers and instruct them on how they and their customers can properly pay taxes. But Coinbase said in a comment letter to the agency on Thursday that the proposed rule represents “an unprecedented, unchecked, and unlimited tracking on the daily lives of Americans.”
“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,” according to the letter from Lawrence Zlatkin, the vice president of tax for Coinbase Global Inc.
The Blockchain Association, a U.S. crypto advocacy group, had previously argued that adopting these provisions could kill the industry in the U.S.
Hours before the Coinbase letter, the IRS had something of its own to say about crypto dragging down tax revenues with its latest “tax gap” estimate that flags how much tax money the agency should be receiving but isn’t. That estimate highlighted crypto as part of a growing problem, saying the projections can’t account for noncompliance in some areas including “issues involving digital assets and cryptocurrency.”
In August, the Treasury Department published its nearly 300-page proposed rule, meant to finally comply with the 2021 Infrastructure Investment and Jobs Act. It sets out reporting obligations for centralized crypto exchanges, payment processors, some hosted wallet providers, some decentralized exchanges and people or entities that redeem crypto tokens.
Sen. Elizabeth Warren (D-Mass.) and other Democratic senators, wrote their own letter to the IRS this week that advised the agency to rebuff industry complaints. The lawmakers’ chief concern was that the rules as proposed will take too long to go into force, which would “disadvantage law-abiding Americans and cause the federal government to lose out on billions of dollars in tax revenue.” Impose the rule “as swiftly as possible,” the senators suggested.
But Coinbase asked the IRS to re-write the proposal “to limit compliance requirements to those parties that directly effectuate transactions in digital assets similar to those in traditional finance.”
The agency must review the public comments received up to its October 30 deadline before it can consider a final rule.
Read More: U.S. Crypto Tax Proposal Lets Miners Off the Hook, Snares ‘Some’ Decentralized Exchanges