Oct. 15, 2023
Dear Internal Revenue Service and Treasury Department, I have reviewed the PDF document titled "Gross Proceeds and Basis Reporting by Brokers and Determination of Amount Realized and Basis for Digital Asset Transactions" and would like to provide some feedback on the proposed regulations regarding information reporting and the determination of amount realized and basis for certain digital asset sales and exchanges. Overall, I commend your efforts in addressing this complex and evolving area in the digital asset space. However, I do have some concerns that I would like to express. First and foremost, my main concern revolves around privacy and safety. As a taxpayer, I am apprehensive about so many third parties having access to my sensitive financial data, such as my social security number. While I understand the need for accurate reporting, it is important to consider the potential risks associated with sharing such information with multiple entities. I encourage you to prioritize protecting individuals' privacy while ensuring compliance with reporting requirements. Additionally, I find the proposed regulations to be somewhat confusing. The inclusion of reporting requirements for various participants in decentralized finance (DeFi) may lead to multiple and inconsistent reports for the same transaction. This complexity could potentially create confusion and administrative burdens for both taxpayers and reporting entities. I urge you to streamline the reporting process to ensure clarity and consistency. Another area of concern is the impact these regulations may have abroad. It would be beneficial to carefully consider the reporting requirements for protocols and users outside of the United States. Limiting these requirements appropriately can help avoid unnecessary complications and regulatory overlap in the international digital asset landscape. Furthermore, I believe that some terms used in the proposed regulations are poorly defined. For instance, terms like "platform" can have varying interpretations, while essential concepts like "wallet," "smart contracts," and "validator" do not accurately reflect their technical meanings. This lack of clarity may result in confusion and misinterpretation. I recommend refining and providing more precise definitions to ensure consistent understanding and compliance. In conclusion, I appreciate the IRS and Treasury Department's efforts in proposing regulations to address digital asset transactions. While I have outlined my concerns, I believe that with careful consideration and revision, these regulations can strike a balance between compliance and protecting individuals' privacy. I am grateful for the opportunity to share my feedback and hope that my input will contribute to the improvement of these regulations. Thank you for your attention to these matters. Sincerely, Peter