Coinbase CPO Urges US Tax Reform to Simplify Crypto Compliance

Faryar Shirzad, the Chief Policy Officer of Coinbase, has formally called upon United States lawmakers to modernize the nation's cryptocurrency tax framework. Shirzad argues that the current classification of digital assets as "property" by the Internal Revenue Service (IRS) has become outdated and creates an unsustainable administrative burden for both taxpayers and digital asset service providers. The executive emphasized that the existing rules do not account for the high frequency of micro-transactions common in the modern decentralized economy.

The Compliance Burden of Digital Asset Classification

Under the prevailing legal structure, every interaction with a blockchain—including the payment of gas fees or the use of stablecoins for retail purchases—is treated as a taxable event. This requires users to meticulously track the cost basis, calculate capital gains or losses, and report these figures for every individual transaction. According to Coinbase, this complexity is reflected in their operational data, which shows:

• Tax-related customer service inquiries have surged by 34% compared to the previous year.
• Over 63% of users currently have significant gaps in their cost basis records.
• Taxpayers frequently overpay their obligations due to the difficulty of manual reconciliation.

The classification of crypto as property means that even a $2 transaction can trigger a reporting requirement similar to the sale of a house or stocks.

Projected Challenges for the 2025 Tax Season

The urgency of the reform request is heightened by the upcoming implementation of new reporting standards. By 2025, millions of 1099-DA forms are expected to be issued by exchanges and brokers. Shirzad pointed out that a substantial portion of these forms will involve negligible transaction amounts, potentially overwhelming the IRS and taxpayers alike with data of little fiscal significance.

Treating crypto assets as property leads to tax obligations even for paying gas fees or using stablecoins for daily transactions, creating a massive compliance burden for the average user.

Proposed Solutions for Legislative Reform

To mitigate these issues, Shirzad suggested that the U.S. government establish a de minimis exemption for small-scale transactions. Such a threshold would eliminate the need to report micro-transactions, significantly reducing the volume of paperwork for the IRS and the compliance costs for individual investors. This proposed change aims to align the tax code with the functional reality of Web3 technologies and digital payments.

In conclusion, the push for tax reform reflects a broader industry effort to transition cryptocurrency from a purely speculative vehicle into a functional medium of exchange. As the 2025 reporting deadline approaches, the dialogue between major industry players like Coinbase and federal regulators will be critical in determining the future ease of use for digital assets in the United States.