Reactions have been pouring in from stakeholders in the crypto and digital assets industry in India following the approval of the country’s Finance Bill 2022 on Friday by Lok Sabha, the lower house of India’s bicameral parliament.
While some stakeholders were pessimistic of the section of the Bill mandating a capital gains tax of 30% on crypto transactions, others were optimistic that the law would relax with time.
Nirmala Sitharaman, India’s Finance Minister, during a budgetary speech delivered before the House in February had said the government would impose 30 percent taxation on the transfer of virtual assets from the financial year 2022-2023.
She also disclosed the government’s intention to lay a 1% tax deducted at source (TDS) on the purchase and sale of cryptocurrencies in the country. She added that any gifts made in digital currencies will also be taxed at the hands of the recipient.
The finance minister had also confirmed that crypto holders cannot offset their losses from cryptocurrencies with the capital gains tax, which is allowed for stock investors.
However, despite the industry’s call for the government to tone down the crypto taxation, the bill was passed into law, with Sitharaman insisting that the government was taxing crypto because people are profiting from it.
With the passage, the crypto taxes will come into effect on April 1, while the TDS will start on July 1.
Mixed Industry Reactions
Nischal Shetty, the Chief Executive Officer of WazirX, one of India’s biggest cryptocurrency exchanges, said the passage “is poised to do more harm than good,” adding that the law could shoot down patronage of Indian exchanges and a subsequent increase in capital outflow to foreign ones.
Sathvik Vishwanath, co-founder and CEO of Unocoin, was particularly concerned about the effect the law will have on crypto traders in the country.
“This will have some repercussions on traders, especially the 1% TDS assessment. This will not only affect traders but also tax collections. We hope that in the subsequent years the crypto industry gets treated like other investment-related industries,” he explained.
Abhay Aggarwal, CEO and founder of non-fungible token (NFT) marketplace, Colexion, said the law will hamper the overall growth of the sector by reducing countrywide adoption and credibility.
On the positive side, however, Coinstore, a Singapore-based crypto exchange
Exchange
An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectively relevant with real-time pricing.Depending upon where you reside, an exchange may be referred to as a bourse or a share exchange while, as a whole, exchanges are present within the majority of countries. Who is Listed on an Exchange?As trading continues to transition more to electronic exchanges, transactions become more dispersed through varying exchanges. This in turn has caused a surge in the implementation of trading algorithms and high-frequency trading applications. In order for a company to be listed on a stock exchange for example, a company must divulge information such as minimum capital requirements, audited earnings reports, and financial reports.Not all exchanges are created equally, with some outperforming other exchanges significantly. The most high-profile exchanges to date include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), the London Stock Exchange (LSE), and the Nasdaq. Outside of trading, a stock exchange may be used by companies aiming to raise capital, this is most commonly seen in the form of initial public offerings (IPOs).Exchanges can now handle other asset classes, given the rise of cryptocurrencies as a more popularized form of trading.
An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectively relevant with real-time pricing.Depending upon where you reside, an exchange may be referred to as a bourse or a share exchange while, as a whole, exchanges are present within the majority of countries. Who is Listed on an Exchange?As trading continues to transition more to electronic exchanges, transactions become more dispersed through varying exchanges. This in turn has caused a surge in the implementation of trading algorithms and high-frequency trading applications. In order for a company to be listed on a stock exchange for example, a company must divulge information such as minimum capital requirements, audited earnings reports, and financial reports.Not all exchanges are created equally, with some outperforming other exchanges significantly. The most high-profile exchanges to date include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), the London Stock Exchange (LSE), and the Nasdaq. Outside of trading, a stock exchange may be used by companies aiming to raise capital, this is most commonly seen in the form of initial public offerings (IPOs).Exchanges can now handle other asset classes, given the rise of cryptocurrencies as a more popularized form of trading. Read this Term that recently started operations in India, believes that the crypto tax is a good move that “will open the doors for crypto regulation in one of the largest democracies in the world.”
“India is a tech powerhouse and it has the potential to lead the world in the crypto and blockchain revolution. Some may feel that the tax structure is on the heavy side but it may undergo adjustments to match global expectations as the crypto industry in India enters a more mature phase. We are hopeful that Indian regulators will reach a consensus with the crypto industry soon,” said Charles Tan, Head of Marketing at Coinstore.
Lennix Lai, Director of OKX, formerly known as OKEx, the Seychelles-based cryptocurrency exchange
Cryptocurrency Exchange
A cryptocurrency exchange is an online platform that supports the exchange of various currencies for a cryptocurrency or digital asset.Comparable to a generalized financial exchange, a crypto exchange’s core function is to permit and encourage the buying and selling of cryptos.This is accomplished by producing a stable trading environment suitable for traders nested through different locations around the world. Sometimes a crypto exchange may be referred to as a digital currency exchange (DCE) for short.How Does Trading Take Place on a Crypto Exchange?Cryptocurrency trading occurs over a centralized exchange, although these crypto exchanges should be used with caution given the implications that surround the custody of new assets. Similar to the banking industry, when a crypto exchange holds cryptocurrencies of users they accrue interest and are no longer classified as client money.These provide an accessible platform for not only companies, hedge funds, and retail traders for exchanging digital currencies.Additionally, crypto exchanges serve a critical role in producing stability within the cryptocurrency sector given how the sourcing and pricing of these assets are innately volatile. One could think of a crypto exchange as an intermediary who provides a service by connecting buyers and sellers from various markets under one roof. In exchange for facilitating trades and for services rendered, a digital currency exchange generally collects a fee of an outgoing transaction that averages between 0.20% to 0.25% or will request a deposit fee that has been known to be as high as 11% for credit card deposits. Crypto exchanges may also support the exchange of crypto tokens, such as the Binance Token, which is ranked as the 9th most valuable cryptocurrency in the world.
A cryptocurrency exchange is an online platform that supports the exchange of various currencies for a cryptocurrency or digital asset.Comparable to a generalized financial exchange, a crypto exchange’s core function is to permit and encourage the buying and selling of cryptos.This is accomplished by producing a stable trading environment suitable for traders nested through different locations around the world. Sometimes a crypto exchange may be referred to as a digital currency exchange (DCE) for short.How Does Trading Take Place on a Crypto Exchange?Cryptocurrency trading occurs over a centralized exchange, although these crypto exchanges should be used with caution given the implications that surround the custody of new assets. Similar to the banking industry, when a crypto exchange holds cryptocurrencies of users they accrue interest and are no longer classified as client money.These provide an accessible platform for not only companies, hedge funds, and retail traders for exchanging digital currencies.Additionally, crypto exchanges serve a critical role in producing stability within the cryptocurrency sector given how the sourcing and pricing of these assets are innately volatile. One could think of a crypto exchange as an intermediary who provides a service by connecting buyers and sellers from various markets under one roof. In exchange for facilitating trades and for services rendered, a digital currency exchange generally collects a fee of an outgoing transaction that averages between 0.20% to 0.25% or will request a deposit fee that has been known to be as high as 11% for credit card deposits. Crypto exchanges may also support the exchange of crypto tokens, such as the Binance Token, which is ranked as the 9th most valuable cryptocurrency in the world. Read this Term, also toed Tan’s line, noting that taxing an certain asset class indicates that those assets are recognized as a tradable asset class by country’s regulator.
“That gives the industry a lot more clarity on the legal status of crypto and its derived income. Hence it’s good news for the industry in India with respect to building a more regulated operating environment for crypto,” Lai added.
Distrust in Cryptocurrencies?
For some time now, the Indian government has been mulling over the possibility of launching its own central bank digital currency (CBDC). In a budgetary speech in February, Shitaraman had said the Reserve Bank of India (RBI) was going to introduce the CBDC in the country’s next financial year.
Meanwhile, the Indian government had initially made efforts to impose a complete ban on cryptocurrencies as a payment mode with a bill that recommended strict jail terms for violators who could be arrested without any warrant.
The Cryptocurrency and Regulation of Official Digital Currency Bill had also sought to ban all private cryptocurrencies in the country, although it wanted to allow for “certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
Tax evasion has also been a problem in the Indian cryptocurrency space. A raid on six Indian crypto exchanges earlier this year had uncovered $9.4M in unpaid taxes with WazirX alone evading $6 million in taxes.
Reactions have been pouring in from stakeholders in the crypto and digital assets industry in India following the approval of the country’s Finance Bill 2022 on Friday by Lok Sabha, the lower house of India’s bicameral parliament.
While some stakeholders were pessimistic of the section of the Bill mandating a capital gains tax of 30% on crypto transactions, others were optimistic that the law would relax with time.
Nirmala Sitharaman, India’s Finance Minister, during a budgetary speech delivered before the House in February had said the government would impose 30 percent taxation on the transfer of virtual assets from the financial year 2022-2023.
She also disclosed the government’s intention to lay a 1% tax deducted at source (TDS) on the purchase and sale of cryptocurrencies in the country. She added that any gifts made in digital currencies will also be taxed at the hands of the recipient.
The finance minister had also confirmed that crypto holders cannot offset their losses from cryptocurrencies with the capital gains tax, which is allowed for stock investors.
However, despite the industry’s call for the government to tone down the crypto taxation, the bill was passed into law, with Sitharaman insisting that the government was taxing crypto because people are profiting from it.
With the passage, the crypto taxes will come into effect on April 1, while the TDS will start on July 1.
Mixed Industry Reactions
Nischal Shetty, the Chief Executive Officer of WazirX, one of India’s biggest cryptocurrency exchanges, said the passage “is poised to do more harm than good,” adding that the law could shoot down patronage of Indian exchanges and a subsequent increase in capital outflow to foreign ones.
Sathvik Vishwanath, co-founder and CEO of Unocoin, was particularly concerned about the effect the law will have on crypto traders in the country.
“This will have some repercussions on traders, especially the 1% TDS assessment. This will not only affect traders but also tax collections. We hope that in the subsequent years the crypto industry gets treated like other investment-related industries,” he explained.
Abhay Aggarwal, CEO and founder of non-fungible token (NFT) marketplace, Colexion, said the law will hamper the overall growth of the sector by reducing countrywide adoption and credibility.
On the positive side, however, Coinstore, a Singapore-based crypto exchange
Exchange
An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectively relevant with real-time pricing.Depending upon where you reside, an exchange may be referred to as a bourse or a share exchange while, as a whole, exchanges are present within the majority of countries. Who is Listed on an Exchange?As trading continues to transition more to electronic exchanges, transactions become more dispersed through varying exchanges. This in turn has caused a surge in the implementation of trading algorithms and high-frequency trading applications. In order for a company to be listed on a stock exchange for example, a company must divulge information such as minimum capital requirements, audited earnings reports, and financial reports.Not all exchanges are created equally, with some outperforming other exchanges significantly. The most high-profile exchanges to date include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), the London Stock Exchange (LSE), and the Nasdaq. Outside of trading, a stock exchange may be used by companies aiming to raise capital, this is most commonly seen in the form of initial public offerings (IPOs).Exchanges can now handle other asset classes, given the rise of cryptocurrencies as a more popularized form of trading.
An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectively relevant with real-time pricing.Depending upon where you reside, an exchange may be referred to as a bourse or a share exchange while, as a whole, exchanges are present within the majority of countries. Who is Listed on an Exchange?As trading continues to transition more to electronic exchanges, transactions become more dispersed through varying exchanges. This in turn has caused a surge in the implementation of trading algorithms and high-frequency trading applications. In order for a company to be listed on a stock exchange for example, a company must divulge information such as minimum capital requirements, audited earnings reports, and financial reports.Not all exchanges are created equally, with some outperforming other exchanges significantly. The most high-profile exchanges to date include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), the London Stock Exchange (LSE), and the Nasdaq. Outside of trading, a stock exchange may be used by companies aiming to raise capital, this is most commonly seen in the form of initial public offerings (IPOs).Exchanges can now handle other asset classes, given the rise of cryptocurrencies as a more popularized form of trading. Read this Term that recently started operations in India, believes that the crypto tax is a good move that “will open the doors for crypto regulation in one of the largest democracies in the world.”
“India is a tech powerhouse and it has the potential to lead the world in the crypto and blockchain revolution. Some may feel that the tax structure is on the heavy side but it may undergo adjustments to match global expectations as the crypto industry in India enters a more mature phase. We are hopeful that Indian regulators will reach a consensus with the crypto industry soon,” said Charles Tan, Head of Marketing at Coinstore.
Lennix Lai, Director of OKX, formerly known as OKEx, the Seychelles-based cryptocurrency exchange
Cryptocurrency Exchange
A cryptocurrency exchange is an online platform that supports the exchange of various currencies for a cryptocurrency or digital asset.Comparable to a generalized financial exchange, a crypto exchange’s core function is to permit and encourage the buying and selling of cryptos.This is accomplished by producing a stable trading environment suitable for traders nested through different locations around the world. Sometimes a crypto exchange may be referred to as a digital currency exchange (DCE) for short.How Does Trading Take Place on a Crypto Exchange?Cryptocurrency trading occurs over a centralized exchange, although these crypto exchanges should be used with caution given the implications that surround the custody of new assets. Similar to the banking industry, when a crypto exchange holds cryptocurrencies of users they accrue interest and are no longer classified as client money.These provide an accessible platform for not only companies, hedge funds, and retail traders for exchanging digital currencies.Additionally, crypto exchanges serve a critical role in producing stability within the cryptocurrency sector given how the sourcing and pricing of these assets are innately volatile. One could think of a crypto exchange as an intermediary who provides a service by connecting buyers and sellers from various markets under one roof. In exchange for facilitating trades and for services rendered, a digital currency exchange generally collects a fee of an outgoing transaction that averages between 0.20% to 0.25% or will request a deposit fee that has been known to be as high as 11% for credit card deposits. Crypto exchanges may also support the exchange of crypto tokens, such as the Binance Token, which is ranked as the 9th most valuable cryptocurrency in the world.
A cryptocurrency exchange is an online platform that supports the exchange of various currencies for a cryptocurrency or digital asset.Comparable to a generalized financial exchange, a crypto exchange’s core function is to permit and encourage the buying and selling of cryptos.This is accomplished by producing a stable trading environment suitable for traders nested through different locations around the world. Sometimes a crypto exchange may be referred to as a digital currency exchange (DCE) for short.How Does Trading Take Place on a Crypto Exchange?Cryptocurrency trading occurs over a centralized exchange, although these crypto exchanges should be used with caution given the implications that surround the custody of new assets. Similar to the banking industry, when a crypto exchange holds cryptocurrencies of users they accrue interest and are no longer classified as client money.These provide an accessible platform for not only companies, hedge funds, and retail traders for exchanging digital currencies.Additionally, crypto exchanges serve a critical role in producing stability within the cryptocurrency sector given how the sourcing and pricing of these assets are innately volatile. One could think of a crypto exchange as an intermediary who provides a service by connecting buyers and sellers from various markets under one roof. In exchange for facilitating trades and for services rendered, a digital currency exchange generally collects a fee of an outgoing transaction that averages between 0.20% to 0.25% or will request a deposit fee that has been known to be as high as 11% for credit card deposits. Crypto exchanges may also support the exchange of crypto tokens, such as the Binance Token, which is ranked as the 9th most valuable cryptocurrency in the world. Read this Term, also toed Tan’s line, noting that taxing an certain asset class indicates that those assets are recognized as a tradable asset class by country’s regulator.
“That gives the industry a lot more clarity on the legal status of crypto and its derived income. Hence it’s good news for the industry in India with respect to building a more regulated operating environment for crypto,” Lai added.
Distrust in Cryptocurrencies?
For some time now, the Indian government has been mulling over the possibility of launching its own central bank digital currency (CBDC). In a budgetary speech in February, Shitaraman had said the Reserve Bank of India (RBI) was going to introduce the CBDC in the country’s next financial year.
Meanwhile, the Indian government had initially made efforts to impose a complete ban on cryptocurrencies as a payment mode with a bill that recommended strict jail terms for violators who could be arrested without any warrant.
The Cryptocurrency and Regulation of Official Digital Currency Bill had also sought to ban all private cryptocurrencies in the country, although it wanted to allow for “certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
Tax evasion has also been a problem in the Indian cryptocurrency space. A raid on six Indian crypto exchanges earlier this year had uncovered $9.4M in unpaid taxes with WazirX alone evading $6 million in taxes.
With tax season officially underway, customers expecting a refund might be wondering what to do with their extra cash. Now, Coinbase customers can get tax refunds automatically deposited into Coinbase as USD, where it can be immediately converted into crypto, when they file with TurboTax. Customers will receive their full refund and can choose to save, invest, or spend it. Tax season can be stressful, but now there’s an easy way to put refunds to work.
Put your refund to work on Coinbase
According to the National Retail Federation, 62% of US taxpayers who expect to receive a refund this year plan to put the money towards savings, while 27% plan to use it for everyday spending. Our customers are increasingly thinking about how to incorporate crypto in their savings and everyday spending: putting money towards assets they think will increase in value, holding yield-bearing assets, and spending and earning with Coinbase. This year, customers can deposit refunds into Coinbase fee-free to start immediately putting their money to work. They can choose to get refunds deposited into 100+ cryptocurrencies from stablecoins to yield-bearing assets so they can trade or earn interest. Or, they can choose to receive refunds in USD so they can be ready for any trade or to spend with their Coinbase Visa® Card (if they choose to spend USD). All incoming tax refunds will be deposited without any fees².
File with TurboTax to deposit your refund into Coinbase
You can deposit your refund into Coinbase when you file with TurboTax. Here’s how:
Begin filing your taxes from the Coinbase section of the TurboTax website
Login using your TurboTax credentials and complete your tax return (plus, Coinbase customers get up to $20 off)
After your tax refund has been calculated, TurboTax will ask you to enter account details to receive your refund. Find and tap on the Coinbase option and we’ll help you set up your direct deposit account³
You will follow a few simple steps to activate your account and select the crypto (or USD) in which you want to receive your tax refund
When prompted, tap on the Manual option to view your Coinbase account and routing number⁴
Go back to TurboTax and enter your Coinbase account and routing number as the destination for your tax refund. You’ll use MetaBank as the name of the bank
You can manage your direct deposit settings and view your account and routing number at any time from coinbase.com/direct-deposit
Coinbase is committed to giving everyone instant and easy access to the cryptoeconomy. Last year, we started helping customers get paid in crypto and receive expense reimbursements in crypto. We’ll continue to enable new use cases that allow customers to transition more of their financial lives to the cryptoeconomy.
We’re also committed to making tax season as easy as possible. Visit www.coinbase.com/taxes for a personalized guide to your crypto taxes⁵.
¹If you choose to receive your refund in crypto, Coinbase will automatically convert the amount from US dollars to crypto with no trading fees. Choosing to receive your refund in crypto is an optional Coinbase offer.
²No Coinbase trading fees but a spread applies when we buy, sell, or trade cryptocurrencies. Other standard fees may apply, and will be shared during direct deposit sign-up.
³You can deposit a maximum of $25,000 per day.
⁴Coinbase account and routing number is for deposits only, withdrawals will be rejected.
⁵Coinbase doesn’t provide tax advice. Information here is provided to help you understand your taxes, but should be reviewed before you use it to file your taxes. Please work with a professional.
The Coinbase Card is issued by MetaBank®, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. The Coinbase Card is powered by Marqeta. You may use Coinbase Card to make purchases anywhere Visa Debit cards are accepted.
A recent update to Her Majesty’s Revenue and Customs (HMRC) regulations has introduced a digital services tax that will be levied on cryptocurrency exchanges operating in the United Kingdom.
Crypto exchanges in the UK will now have to pay a 2% digital services tax according to a Telegraph report. Britain’s tax authority, HMRC, does not recognize digital assets as financial instruments and therefore exchanges are not eligible for financial exemptions.
On Nov. 28, the authority included cryptocurrency exchanges under the Treasury’s tech tax. The digital services tax on revenue was introduced in April 2020 targeting social media and search giants such as Facebook and Google.
The latest blow to crypto exchanges is a result of the HMRC’s classification of crypto assets, as the regulator explained:
“There are a wide variety of crypto assets, each with different characteristics. It said that because cryptocurrencies do not represent commodities, financial contracts, or money, it is unlikely that crypto-asset exchanges can benefit from the exemption for online financial marketplaces.”
According to CryptoUK, the trade body representing the digital asset sector in Britain, the tax is unfair and is likely to be passed on to investors and traders.
Executive Director Ian Taylor stated that treating cryptocurrencies differently to other financial instruments such as stocks or commodities is detrimental to the crypto sector.
He added that it is another heavy blow to the industry following the arduous licensing system introduced by the Financial Conduct Authority (FCA) for exchanges. Since January, all UK-based crypto-asset companies have had to comply with AML (anti-money laundering) regulations and register with FCA.
The regulator imposed a ban on crypto derivatives in January, and in June, the FCA warned consumers against 111 crypto firms that had yet to register with it.
Related:UK revenue authority to target cryptocurrency tax evaders
In April, Cointelegraph reported that HMRC was ramping up its efforts to snare crypto tax evaders and introduced explicit demands on details of digital asset holdings on self-assessment forms.
Britain’s tax authorities reportedly demanded that several crypto asset exchanges hand over details on customers from transactions and holdings in August 2019.
As Global Head of Tax for one of the largest crypto exchanges, while I appreciate the Bloomberg Editorial Board’s perspective on the crypto tax provision in the Senate infrastructure bill, I would like to respectfully offer the following critique from a real-world actor in the crypto space. I disagree with the timing and need for the unexpected and new crypto tax provision in the bill and how it was drafted. The best first step would be to issue regulations so that digital asset brokers would be permitted to issue the same third-party reporting that brokerage firms, like Fidelity and Charles Schwab, issue today. It is not a good first step, and certainly not good tax policy, to require non-brokers to report on transactions for people who are not even their customers.
First, some facts —
The IRS already has the authority to require crypto brokers to provide regular reporting of the gains and losses of their customers’ accounts. But they haven’t. For years, the crypto industry has asked for those regulations, and we are still waiting.
The Editorial Board cites the IRS Commissioner’s estimate of the tax gap as $1T to underscore the urgency for including the crypto tax requirement in the infrastructure bill. Meanwhile, Congress’ Joint Committee on Taxation estimates that the crypto tax gap is approximately $28B over 10 years. In effect, crypto is a drop in the bucket when it comes to the tax gap. The Editorial Board neglects to mention this discrepancy, or that neither figure has ever been accompanied with further explanation or additional data. Without supporting data, both figures only serve to create hype and drama.
And while it’s true that the Senate infrastructure bill’s overbroad and unworkable language alarmed us, it also roused a public outcry well beyond the crypto industry. According to public reports, Senate offices were “swamped” with phone calls and emails, with almost 80 thousand people contacting their senators in just a few days. This wave of public advocacy was diverse, ranging from civil liberties organizations like the Electronic Frontier Foundation (EFF) to the Americans for Tax Reform. Social media lit up with citizens from all walks of life protesting this threat to crypto’s future, including non-apparent champions such as TikTok influencers and rock stars.
The Bloomberg Editorial Board says that the IRS needs a broad statute to include non-brokers right now because we don’t know what we don’t know. But why would we impose reporting requirements on intermediaries who are wholly unrelated to brokering a transaction and have no customer relationship? The IRS doesn’t do that outside of crypto and it shouldn’t do that here.
It is disingenuous to suggest that the IRS will take time to issue these regulations and that non-brokers should have no fear of the law until then. Tax policy should be thoughtful and deliberate. Broad overreach is a regulatory mistake. As long as the statute says that software developers, miners, stakers must do the impossible, there is no lawyer who would advise them to risk operating in violation of laws whose penalties for non-compliance would easily bankrupt them. This will harm innovation and stifle the potential of a hugely important technology at its earliest stages of development.
The one thing on which I do agree with the Editorial Board is that the requirements should “apply to entities that can provide the necessary information.” The Editorial Board also should have acknowledged that crypto brokers, like Coinbase, are currently precluded from reporting sales and exchange related information to the IRS. Without a specific legal mandate (such as the IRS regulations), we cannot compromise or disclose customer information to the government.
Now, some suggestions-
“Brokers” of digital assets should be defined as it is understood in the real world today. It is well established that the predominant number of crypto transactions occur with brokers. If Congress decides that it must create a new definition of “broker” within the infrastructure bill for “digital assets,” then it should define brokers as persons who act as middlemen for compensation, with customers as counterparties. This is a traditional definition of broker and would cover entities like Coinbase.
Propose regulations to define the parameters of tax information reporting for crypto. We would welcome the rules of the road so that we can have a meaningful discussion on how it should be introduced and applied in the real world. The IRS has this authority today.
Hold hearings in Congress on tax oversight for crypto so that there is robust debate on the issue. Today, around 60 million Americans own crypto — roughly one-fifth of the entire U.S. population. Those Americans, and the entire crypto ecosystem, deserve more dialogue than midnight provisions inserted at the last minute.
We should not draft legislation that focuses on crypto ghosts that don’t exist now and have no roadmap to exist in the future. If we focus our laws on problems that don’t actually exist, we will erode America’s leadership in crypto. Why chill the industry in its infancy and send it (and the taxes associated with it) offshore?
Coinbase, as the largest U.S. exchange, agrees with the need for information reporting of crypto. We want people to pay all taxes required under the law. We are building systems and protocols for information reporting in response. While we continue to wait on Congress and the IRS to act, we will do our best to provide our customers with the information they need to comply with their personal reporting obligations.
We are rolling out a Tax Center for our customers in the coming month, with the goal of providing education, guidance, support, data, and historical transactional information. It’s hard to do this in practice, and it can’t be done overnight, but we are confident that we will get there and be best in class. Our customers want to be compliant with their tax obligations and have asked for this guidance and support.
We invite meaningful dialogue and discussion to set the appropriate regulatory parameters for our industry. We have offered this at every turn to both legislators and the IRS. The bipartisan leadership demonstrated by Senators Wyden, Lummis, and Toomey in offering their amendment to help resolve this unnecessary confusion underscores exactly how impactful meaningful dialogue can be.
Our response to a recent editorial from Bloomberg on Congress’s crypto tax proposal was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
