The US tax authority IRS wants new regulations with regard to income from crypto investments. The proposal pissed off the Coinbase tax chief.
A legislative change is pending in the USA that could be far-reaching for the crypto industry. Lawrence Zlatkin, Global Vice President of Tax at Coinbase, has now commented on this. The provisions within this law for cryptocurrencies were added “at the last minute”. In addition to the content of the law, Zlatkin criticizes the “lack of discourse” when it came about.
Today around 60 million Americans own cryptocurrencies. That’s about a fifth of the total US population. These Americans, and the entire crypto ecosystem, deserve more dialogue, not provisions inserted by night and fog.
Lawrence Zlatkin, Global Vice President of Tax at Coinbase
Coinbase’s tax chief is reacting to a Bloomberg article that endorses the US Congress’ proposal for a crypto tax. For most investors who invest in financial products, the tax calculation is relatively straightforward. The taxable profits are summarized in the “Form 1099”. Brokers hand this out to their customers every year. The tax authorities will receive a copy so that they can check the tax returns.
In the crypto world, however, it is no longer that easy with this Form 1099. Because trading takes place via a variety of trading venues such as Coinbase, Kraken, and many others. It is therefore difficult for investors, let alone the tax office, to track profits and losses. The Commissioner of the US Tax Service IRS (Internal Revenue Service) Charles Rettig even thinks that the tax authorities lose around 1 trillion US dollars a year as a result.
Coinbase manager sees disadvantages for the USA through law
However, Zlatkin and Coinbase go far too far with the measures envisaged by the new draft law. The added section extends the reporting requirement to digital assets. It gives the government extensive powers to decide which intermediaries are reportable. A “broker” is: “any person who […] Makes transfers of digital assets on behalf of another person ”.
Zlatkin criticizes tax policies that require non-brokers to report transactions made by people who are not even their customers. According to the new version, this would also include wallet and blockchain developers. However, they could not comply with the regulations and in the worst case would turn their backs on the USA, says Zlatkin.
The Coinbase VP of Tax therefore proposes a solution to define the term “broker” for digital assets as it is understood today in other parts of the financial system. Also, hearings should be held in Congress to establish tax oversight for cryptocurrencies so that there is a solid debate on the issue.