Oct. 28, 2023
CC:PA:LPD:PR (REG–122793–19) Room 5203 Internal Revenue Service P.O. Box 7604 Ben Franklin Station Washington, DC 20044 Subject: Comments on Proposed Regulations - Gross Proceeds and Basis Reporting by Brokers and Determination of Amount Realized and Basis for Digital Asset Transactions 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 my comments and concerns regarding the proposed regulations. Specifically, I am focusing my concerns on the following topics: 1. Privacy: I am concerned about the privacy and safety implications associated with allowing so many third parties to have access to sensitive financial data and social security numbers. It seems that the proposed regulations would require a significant amount of personal information to be shared, which raises concerns about potential data breaches and misuse of this information. 2. Identity Theft: I am worried that the proposed regulations will force participants in DeFi (Decentralized Finance) to collect user information, which may not be adequately safeguarded. This could create attractive targets for identity thieves who might exploit the stored taxpayer information under the guise of tax reporting. It is important to ensure that proper precautions are in place to protect against this type of threat. 3. Confusion: The proposed regulations introduce reporting requirements for various participants in DeFi, which may result in multiple and inconsistent reports being generated for the same transaction. This could cause confusion and make it challenging for individuals and businesses to comply with the regulations accurately. It would be beneficial to streamline and standardize the reporting process to minimize confusion and potential errors. 4. Timeliness: I am concerned that the proposed regulations are being implemented without giving companies and protocols enough time to adjust and accommodate the new requirements. Rushing the implementation could lead to compliance challenges and potential disruptions within the digital asset ecosystem. It is essential to provide sufficient transition periods to ensure a smooth adjustment for all stakeholders. 5. Impact Abroad: The proposed regulations do not appear to sufficiently limit reporting requirements for protocols run outside the US and users located outside the US. This lack of restriction could result in unnecessary compliance burdens for international participants and potentially hinder innovation and adoption beyond US borders. It is crucial to consider the global nature of digital assets and address any international impact appropriately. 6. Poorly Defined Terms: I have noticed that the proposed regulations use undefined terms like "platform," which can lead to multiple interpretations and confusion. Additionally, the provided definitions for terms such as "wallet," "smart contracts," and "validator" do not align with their technical meanings, resulting in potential misunderstandings. It would be beneficial to refine and clarify these terms to avoid any ambiguity. 7. Crypto Centralization: Lastly, I am concerned about the potential centralization of power to manage and manipulate crypto prices. It is important to consider the impact of regulations on the decentralized nature of cryptocurrencies and ensure that any regulations do not favor or enable undue influence by a select few. Promoting a fair and transparent market should be a priority. Thank you for considering my concerns and comments. I believe it is crucial to address these issues in order to develop regulations that support both compliance and the continued growth and innovation of the digital asset ecosystem. I appreciate the opportunity to provide input and trust that you will carefully consider these concerns. Sincerely, HexCatholic