Coinbase Criticizes New U.S. Crypto Tax Reporting Rules as Burdensome for Retail Traders

Cryptocurrency exchange Coinbase (NASDAQ: COIN) says new U.S. crypto tax reporting requirements are overly complex and place unnecessary administrative burdens on millions of digital asset holders.

The company is currently distributing millions of the new Form 1099-DA to American users as part of an effort by the Internal Revenue Service (IRS) to standardize digital asset reporting similar to traditional financial assets such as stocks. However, Coinbase argues the rules require reporting many transactions that generate little or no taxable income.

According to Lawrence Zlatkin, Coinbase’s vice president of tax, retail investors conducting small trades are facing unnecessary complexity. He noted that individuals making transactions worth as little as $50 must now report gains or losses, which he believes distracts from the tax system’s primary goal of capturing meaningful income.

The reporting framework also requires disclosure of transactions involving stablecoins such as USD Coin (USDC). Since stablecoins are designed to maintain a fixed value, Coinbase argues these transactions typically do not generate taxable gains but still add significant reporting clutter.

Another issue involves blockchain gas fees—small payments used to process transactions on networks like Ethereum. These fees often amount to only a few cents or dollars but must still be reported under current rules.

Under the new system, crypto platforms must share customer digital asset transaction details with the IRS while providing copies to users. For the 2025 tax season, Coinbase will report only gross proceeds from digital asset sales rather than net gains or cost basis. This means investors must manually calculate their acquisition costs to determine actual taxable gains or losses.

The exchange plans to begin calculating cost basis for customers starting next tax year. Coinbase executives say they are developing tools and educational resources to help users navigate crypto tax reporting as regulations continue evolving in the United States.