Coinbase Urges Crypto Community to Oppose US Treasury's Proposed Tax Reporting Regulations

Crypto Exchange Coinbase Calls for Action Against Proposed Tax Regulations

Paul Singh Grewal, the chief legal officer of cryptocurrency exchange Coinbase, has called upon the crypto community to join forces against the United States Treasury's proposed tax reporting regulations on cryptocurrencies. Grewal believes that these regulations could set a dangerous precedent for surveillance and has urged the community to oppose them.

Proposed Regulations Go Beyond Congressional Mandate, Says Grewal

Grewal took to social media to address concerns about the proposed crypto tax reporting rules. He argued that these regulations go beyond the congressional mandate to establish tax reporting rules. According to Grewal, if the proposed regulations become law, it would put digital assets at a disadvantage and threaten to harm the nascent cryptocurrency industry.

IRS Releases Draft of Proposed Regulations for Crypto Tax Reporting

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

New Form Aims to Simplify Tax Filing Process

The Treasury Department claims that the new form would simplify the tax filing process by helping taxpayers determine if they owe taxes, eliminating the need for complicated calculations or expensive digital asset tax preparation services. If approved, the new tax regime will come into effect in 2026, and brokers will be required to start reporting 2025 transactions in January 2026 via Form 1099-DA. However, many U.S. lawmakers are pushing for the IRS to implement crypto tax reporting requirements earlier than 2026.

Proposed Rules Would Set a "Dangerous Precedent for Surveillance"

The Treasury Department argues that the crypto tax reporting rules would align digital assets with traditional financial reporting. However, Coinbase's chief legal officer disagrees. Grewal believes that the proposed rules would set a dangerous precedent for surveillance by requiring nearly every digital asset transaction, even the purchase of a cup of coffee, to be reported.

Concerns Over Data Collection and Overburdening Web3 Startups

Grewal also expressed concerns about the significant amount of user data that would be collected under the proposed regulations. He argues that this data collection serves no legitimate public purpose and would burden Web3 startups with costly requirements. Additionally, Grewal believes that it would provide the IRS with more data than they can effectively analyze.