Cryptocurrency exchange, Coinbase Global Inc. COIN, has registered its dissent against a new tax proposal by the U.S. Internal Revenue Service (IRS). The exchange perceives the proposal as a potential threat to the cryptocurrency industry and an infringement on the privacy of U.S. citizens.
What Happened: Coinbase’s response to the IRS’s proposal that seeks to define crypto brokers and guide them, along with their clients, on tax compliance, reported CoinDesk. In a letter addressed to the IRS on Thursday, Coinbase expressed its anxiety over the proposal, which it claims could lead to “an unprecedented, unchecked, and unlimited tracking on the daily lives of Americans.”
The letter, authored by Lawrence Zlatkin, Vice President of Tax for Coinbase, lambasted the proposed rules as an “incomprehensible and unduly burdensome set of new reporting requirements”. Zlatkin argued that these rules would potentially hamper the taxpayer services that the IRS intends to improve.
Before the letter from Coinbase, the IRS had earmarked crypto as a contributor to the “tax gap” issue, where potential tax revenue is being missed. However, the crypto exchange has requested the IRS to amend the proposal, limiting compliance requirements to parties directly involved in digital asset transactions, similar to conventional finance.
On the other hand, Democratic senators, including Senator Elizabeth Warren (D-Mass.), have encouraged the IRS to overlook industry objections and enforce the rules promptly to avert tax revenue loss.
The IRS will be contemplating the public comments received till October 30 before finalizing the rule.
Why It Matters: This development follows a trail of events wherein Coinbase has shown dissent over regulatory decisions. On September 11, 2023, Brian Armstrong, CEO of Coinbase, criticized the SEC’s approach towards cryptocurrencies, suggesting that a change in SEC leadership could help resolve the ongoing dispute between his company and the SEC.
Additionally, the industry leader’s concerns over regulatory decisions come at a time when they are expected to face a challenging Q3, according to an analyst from Oppenheimer.
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