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Crypto Community in Turmoil: IRS Tax Plan Hits Bitcoin and Ripple, Coinbase CEO Responds

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  • Coinbase dubs the IRS’s recent crypto taxation proposal as “incomprehensible” and a threat to the industry and user privacy.
  • The IRS counters with concerns about the crypto sector dragging down potential tax revenues.

Coinbase’s Stand on IRS’s Tax Proposal

In the ever-evolving landscape of cryptocurrency, Coinbase (COIN), the leading U.S. crypto exchange, has made its concerns heard regarding the U.S. Internal Revenue Service’s (IRS) recent taxation proposition. This proposed rule aims to explicitly delineate crypto brokers and provide them clarity on taxation. However, Coinbase has voiced its apprehensions, suggesting that the proposal could significantly risk the industry’s future and impinge on Americans’ privacy.

Unchecked and Unlimited Tracking

In an official comment letter addressed to the IRS, Lawrence Zlatkin, Coinbase Global Inc.’s vice president of tax, detailed the company’s reservations. He mentioned that the current formulation of the rule would potentially result in

“an unprecedented, unchecked, and unlimited tracking on the daily lives of Americans.”

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Further amplifying this sentiment, he stated that such rules would construct a baffling and excessively demanding set of reporting prerequisites, consequently undermining the very taxpayer services the IRS aims to enhance.

Additionally, the Blockchain Association, a recognized crypto advocacy body in the U.S., echoed similar sentiments. The group earlier contended that embracing such provisions might potentially stifle the growth of the crypto realm within the country.

IRS’s Stance on Crypto and Tax Revenues

In a twist, shortly before Coinbase’s publicized letter, the IRS released its insights. It underlined concerns about cryptocurrency affecting potential tax inflows via its recent “tax gap” estimation. This assessment illuminates the discrepancy between expected tax revenues and actual collections. Here, the IRS underscored the digital assets domain, pointing out challenges in gauging noncompliance involving crypto transactions.

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The overarching narrative started in August when the Treasury Department unveiled its extensive proposed rule. This documentation, spanning nearly 300 pages, sought to align with the 2021 Infrastructure Investment and Jobs Act. It articulates the reporting obligations for various crypto entities, ranging from centralized exchanges to individuals transacting in crypto tokens.

Adding to the mix, Sen. Elizabeth Warren, along with some Democratic senators, submitted their perspective to the IRS. Their primary contention revolves around the extended implementation timeline of the proposed rules, fearing substantial losses in potential tax revenue. Their unequivocal advice to the IRS: Implement the rules without delay.

However, as a counter, Coinbase urged the IRS to reconsider and restructure the proposal. Their suggestion pivots on streamlining compliance mandates, focusing on parties directly involved in crypto transactions, mirroring traditional financial structures.

As the clock ticks, the IRS is slated to peruse all received public feedback until the October 30 deadline, post which, deliberations on the final rule will commence.

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Brian Johnson
Brian Johnson
A dedicated Bitcoin journalist passionate about uncovering the latest trends, developments, and innovations in the world of cryptocurrency, while delivering engaging and well-researched articles to inform and educate readers on the dynamic digital finance landscape.
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