Coinbase says new U.S. crypto tax rules are creating unnecessary clutter and confusion
Coinbase, the Nasdaq-listed crypto exchange, warned that new U.S. tax-reporting rules for digital assets are overly burdensome for many retail users and are introducing needless complexity into the tax system.
Under the new regime, platforms are issuing 1099-DA forms to millions of American crypto holders to align crypto reporting with other financial assets. But Coinbase executives say the way the rules are written forces reporting of transactions that don’t represent meaningful taxable income — notably stablecoin movements and tiny “gas” fees paid to process transactions on blockchains.
“Frankly, [small retail] transactional flow is so small, I just don't know why we're spending efforts as a country focused on them,” said Lawrence Zlatkin, Coinbase’s VP of Tax. “I just think it does a disservice to people when you're trading $50, let's say, that you get a form like this and you have to report gains or losses. That's just not what the tax system is supposed to be about.”
What Coinbase is currently doing — and what customers should expect
- This tax year Coinbase is sending 1099-DA forms that include gross proceeds from digital asset sales to the IRS; customers receive copies so they can reconcile gains and losses voluntarily.
- Crucially, Coinbase will report gross proceeds only this year — not cost basis or net proceeds — leaving buyers and sellers responsible for reconstructing acquisition costs and actual taxable gains or losses.
- Coinbase plans to start calculating cost basis for customers beginning with the next tax year, which the company says should reduce some of the administrative burden.
Why this is particularly messy for crypto users
- Crypto’s on-chain nature — assets moved between wallets and platforms, and frequent token swaps — makes it harder to track cost basis than traditional equities, where transfer statements commonly carry basis data between brokers.
- Certain required line items are arguably irrelevant for tax purposes: stablecoins like USDC are pegged to fiat and generally don’t generate income simply by being held, yet transactions involving them must be reported.
- Tiny blockchain gas fees — sometimes just cents or dollars — are also being captured by the reporting system, adding paperwork for negligible tax consequences.
“People should pay taxes where they have income,” Zlatkin said. “Do you have income on USDC? No, you don't. So why are we reporting USDC transactions? … Gas fees might be 50 cents, a buck — do we have to disclose that? Is that a valuable use of resources to collect revenue? I would posit that the answer is no.”
Coinbase’s response and next steps
Coinbase says its immediate priority is educating customers and building tools to simplify cost-basis calculations and reporting. Ian Unger, the company’s director of tax reporting information, pointed out the contrast with equities: when stocks move between brokers, cost basis typically transfers with them, but “that's not the world we live in today for crypto assets.”
Unger added that improved infrastructure and industry standards could make reporting easier in future, but until those systems exist, many retail investors should expect confusion and additional paperwork.
Bottom line
The new 1099-DA framework aims to bring crypto reporting into the mainstream, but Coinbase argues the current implementation sweeps in a lot of low-value activity and places a heavy administrative load on ordinary traders. The exchange is pushing for clearer rules and building product solutions — including cost-basis calculations next year — to help users comply without drowning in “cluttered” reporting.
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