Coinbase Says New Crypto Tax Rules Are Cluttered, Confusing

New crypto tax reporting rules in the United States are drawing sharp criticism from Coinbase, with the Nasdaq-listed exchange calling the current system burdensome, cluttered with low-value disclosures, and likely to confuse the millions of retail crypto holders who will receive a 1099-DA form for the first time this year.

Why Coinbase Says the New Rules Miss the Mark

The core of Coinbase's objection is proportionality. The exchange's VP of tax, Lawrence Zlatkin, told reporters that forcing retail customers — many of whom dabble in $50 worth of crypto — to fill out the same reporting paperwork as institutional traders serves no meaningful revenue purpose. The crypto tax reporting rules issued by the IRS require brokers to report gross proceeds from digital asset sales starting with transactions on or after January 1, 2025, treating crypto exchanges much like stock brokers.

"Frankly, [small retail] transactional flow is so small, I just don't know why we're spending efforts as a country focused on them," Zlatkin said in an interview. "I just think it just does a disservice to people when you're trading 50 bucks, 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."

People should pay taxes where they have income. Do you have income on USDC? No, you don't. So why are we reporting USDC transactions? That, to me, clutters the system.

— Lawrence Zlatkin, VP of Tax, Coinbase

What Does the 1099-DA Form Actually Require?

The 1099-DA form is the IRS instrument designed to capture digital asset proceeds from broker transactions. For trading platforms like Coinbase, compliance means transmitting the details of customers' digital asset trades directly to the IRS. Customers receive a copy so they can reconcile their gains and losses with the tax authority — the same model that governs stocks and bonds.

But the analogy to traditional finance breaks down in practice. This year, Coinbase will report only the gross proceeds of digital asset sales to the IRS — not the net value or the cost basis. That gap leaves the burden of reconciliation squarely on the trader. A customer who bought Bitcoin across multiple exchanges and then sold on Coinbase must independently track acquisition costs, because the cost basis does not travel with the asset the way it does in equities markets. Ian Unger, Coinbase's director of tax reporting information, acknowledged the gap directly. "That's not the world we live in today for crypto assets," Unger said in an interview. "There could be a world where some of this does get easier for those who buy and sell on one exchange and want to move to another exchange. But we're not there yet."

Stablecoins and Gas Fees: Reporting That Adds Nothing

Among the most pointed criticisms from Coinbase is the requirement to report stablecoin transactions. Stablecoins like USDC are, by design, pegged to a fixed value — holding or trading them generates no capital gain or income. Yet under current rules, Coinbase is required to report those transactions because no blanket exemption exists for stablecoins on the exchange. Zlatkin described this as pure clutter in an otherwise functional system.

Gas fees compound the problem. These are the micro-transactions — often 50 cents or a dollar — that users pay to cover blockchain network costs. Zlatkin questioned whether collecting revenue data on amounts that small constitutes a productive use of government or exchange resources. "Gas fees might be 50 cents, a buck — do we have to disclose that? Is that a valuable use of resources to collect revenue? And I would posit that the answer is no," he said. The exchange's position is that compliance resources should be focused where there is genuine taxable income: active trading profits, not network overhead or pegged assets.

We should focus on where there's real income to get people to voluntarily comply. But not where there's no income, such as in stablecoins or in tiny, tiny transactions that are mostly network fees.

— Lawrence Zlatkin, VP of Tax, Coinbase

What Does This Mean for Crypto Holders This Tax Season?

For the average Coinbase customer, the immediate takeaway is straightforward but not comforting: confusion is baked into this year's filing process. All customers will be affected to some extent, but retail users with small, frequent transactions face the steepest administrative climb. The 1099-DA form will show gross proceeds — not net gains — meaning traders must supply their own cost basis data to avoid over-reporting income.

This is particularly hazardous for people who have never dealt with assets outside of crypto, where cost basis tracking is a standard, automated feature of brokerage accounts. The situation is further complicated for anyone who has moved holdings between multiple wallets or platforms — a common behavior in the crypto ecosystem. Coinbase says it plans to introduce cost basis calculation tools and customer education resources to help, with full cost basis reporting on behalf of customers slated to begin in the next tax year. Until then, exchanges like Coinbase are catching up in real time — and so are the millions of holders getting their first taste of formal crypto tax reporting requirements.

• Only gross proceeds reported this year — no cost basis data from Coinbase
• Stablecoin transactions must be reported despite generating no income
• Gas fee disclosures required regardless of the amount
• Customers who traded across multiple platforms must reconcile cost basis independently
• Full cost basis reporting from Coinbase planned for next tax year