Oct. 30, 2023
Dear Internal Revenue Service and Treasury Department, I am writing to express my concerns and provide feedback regarding the proposed regulations discussed in the PDF document titled "Gross Proceeds and Basis Reporting by Brokers and Determination of Amount Realized and Basis for Digital Asset Transactions." While I understand the importance of information reporting and the determination of amount realized and basis for certain digital asset sales and exchanges, I believe there are several aspects of the proposed regulations that need further consideration. Firstly, I would like to address the issue of privacy and the potential risks associated with allowing a large number of third parties to access sensitive financial data and social security numbers. It is crucial to ensure that adequate safeguards are put in place to protect the privacy and safety of individuals who may be affected by these regulations. Identity theft is a major concern, and the proposed regulations have the potential to create opportunities for such crimes to occur under the guise of tax reporting. It is essential to implement robust security measures to prevent this from happening. Additionally, the proposed regulations seem to create reporting requirements for numerous participants in decentralized finance (DeFi), resulting in multiple and inconsistent reports for the same transaction. This confusion can be detrimental to both individuals and businesses involved in these transactions. It is important to streamline the reporting process and minimize ambiguity to ensure efficient and accurate reporting. Furthermore, I am concerned about the timeline for implementation. The proposed regulations are set to come into effect before companies and protocols have sufficient time to adapt and comply with them. It is crucial to provide an adequate transition period to allow for the necessary adjustments to be made without disrupting the operations of affected businesses and organizations. The impact of these regulations also extends beyond the United States. The reporting requirements for protocols operated outside the US and for users located outside the US need to be clearly defined and limited. It is important to establish a balance between effective regulation and avoiding undue burdens on international stakeholders. Moreover, the proposed regulations utilize terms that are poorly defined. Terms such as "platform," "software," and "ledger" can be open to multiple interpretations, potentially leading to confusion and inconsistent implementation. Additionally, the definitions of terms like "wallet" and "validator" do not accurately reflect their technical meaning, which may cause further misunderstandings. It is necessary to provide precise and clear definitions to avoid confusion and ensure consistent understanding across all stakeholders. Lastly, I would like to emphasize the potential impact on small businesses. These reporting requirements may impose significant costs on small businesses and start-up protocols that may not have previously been required to track personally identifiable information. These additional expenses could disadvantage these projects and stifle innovation. It is important to consider the potential burden on small businesses and provide support or exemptions where necessary. In conclusion, I appreciate the efforts made in proposing these regulations to enhance information reporting and the determination of amount realized and basis for digital asset transactions. However, I believe the concerns I have outlined above need to be addressed to ensure a more effective and fair regulatory framework. I encourage you to consider these points seriously and work towards refining and clarifying the proposed regulations to better serve both the industry and the general public. Thank you for your attention to this matter. Sincerely