Coinbase’s Chief Legal Officer, Paul Singh Grewal, has issued a rallying cry to the cryptocurrency community, urging them to unite against the United States Treasury’s proposed tax reporting regulations on cryptocurrencies.
Grewal argues that these regulations could establish a concerning precedent for extensive surveillance.
Taking to the platform formerly known as Twitter (referred to here as “X”), Grewal expressed his apprehensions about the proposed crypto tax reporting rules, asserting that they exceed the congressional mandate aimed at setting tax reporting guidelines.
He warned that if these regulations were to become law, they could place “digital assets at a disadvantage and threaten to harm a nascent industry when it’s just getting started.”
On August 25, the U.S. Internal Revenue Service (IRS) unveiled a draft of proposed regulations for crypto tax reporting.
These rules would mandate crypto brokers to utilize a new form for reporting, simplifying tax filing and combatting tax evasion.
The regulations encompass both centralized and decentralized exchanges, crypto payment processors, select online wallets, and crypto brokers.
The U.S. Treasury Department asserts that this new form would streamline the tax filing process, helping taxpayers ascertain their tax liabilities without requiring intricate calculations or relying on digital asset tax preparation services.
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If approved, the new tax regime is scheduled to take effect in 2026, with brokers obliged to commence reporting 2025 transactions starting in January 2026, using Form 1099-DA.
Nevertheless, several U.S. lawmakers have urged the IRS to implement crypto tax reporting requirements before the year 2026.
Contrary to the Treasury Department’s claims that these crypto tax reporting rules align digital assets with traditional financial reporting, Coinbase’s legal officer contends otherwise.
Grewal, in his X post, pointed out that the proposed rules could establish a “dangerous precedent for surveillance of the everyday financial activities of consumers by requiring nearly every digital asset transaction – even the purchase of a cup of coffee – to be reported.”
Grewal also raised concerns about the substantial user data collection mandated by these regulations, emphasizing that it serves no “legitimate public purpose.”
He argued that this data collection burden would disproportionately affect Web3 startups, imposing costly requirements while inundating the IRS with an overwhelming amount of data that they may struggle to process and analyze.
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