Oct. 22, 2023
Public Comment: REG-122793-19 - Gross Proceeds and Basis Reporting by Brokers and Determination of Amount Realized and Basis for Digital Asset Transactions Dear Internal Revenue Service (IRS) and the Treasury Department, I am writing to express my concerns regarding the proposed regulations on gross proceeds and basis reporting by brokers and the determination of amount realized and basis for digital asset transactions. While I understand the need for effective regulation in the rapidly evolving world of digital assets, I believe that certain aspects of this proposal exhibit regulatory overreach and fail to adequately consider the complexities and nuances of the digital asset space. One of my primary concerns is the potential consequences of imposing burdensome reporting requirements on brokers, including digital asset trading platforms, payment processors, and digital asset hosted wallets. While information reporting is essential for proper tax administration, it is important to strike a balance between effective regulation and innovation. The proposal, if implemented in its current form, could stifle innovation and hinder the growth of the digital asset industry by imposing excessive compliance costs on market participants. Furthermore, the regulatory uncertainties surrounding digital assets have already posed significant challenges to businesses and individuals operating in this space. It is crucial that any regulatory framework provides clarity and guidance to ensure fair treatment and compliance. However, the proposed regulations fail to adequately address the unique characteristics and classification of digital assets, including cryptocurrencies, which are built on blockchain technology and have the potential to revolutionize finance. The lack of clear definitions and guidance pertaining to digital assets in the proposed regulations is concerning. It is essential that the IRS and Treasury Department develop a comprehensive and coherent framework that acknowledges the different types and functionalities of digital assets. This would enable businesses and individuals to navigate the tax landscape with confidence and certainty, thereby fostering innovation and investment in the digital asset industry. Moreover, the proposal's focus on wallet providers and digital asset trading platforms raises questions about privacy and security. The nature of digital assets necessitates the use of wallets, which are essential for storing and transacting with digital assets securely. The proposed regulations could potentially compromise user privacy and security by mandating detailed reporting requirements for every transaction conducted through digital asset wallets. It is crucial that any regulatory measures strike a balance between transparency for tax purposes and the safeguarding of user privacy and security. Additionally, the proposed regulations should take into account the differences between custodial and non-custodial wallets. Non-custodial wallets, also known as self-hosted wallets, provide users with greater control and responsibility over their digital assets. Imposing strict reporting requirements on non-custodial wallet users may discourage individuals from maintaining control over their own assets, undermining the principles of decentralization and user autonomy inherent in digital assets. In conclusion, while I acknowledge the need for effective regulations in the digital asset space, I urge the IRS and Treasury Department to reconsider certain aspects of the proposed regulations. It is essential to strike a balance between regulatory oversight and fostering innovation, while also providing clear and comprehensive guidance that considers the unique characteristics of digital assets. By doing so, we can support the growth and development of the digital asset industry, enhance tax compliance, and protect the privacy and security of individuals using these innovative technologies. Thank you for considering my comments. I appreciate the opportunity to express my concerns regarding this important issue. Should you require any further information or clarification, please do not hesitate to reach out. Sincerely, Ethan Lindner Sent from my iPhone