In the Eastern Standard Time zone this week, Coinbase Chief Policy Officer Faryar Shirzad publicly signaled to Washington, calling for the U.S. Congress and regulatory agencies to rewrite crypto tax rules. In his statement, the core contradiction is very direct: the United States is still using a “property tax system” designed in the 20th century for stocks and real estate to deal with the crypto economy, and this framework has frequently failed to address the high-frequency, fragmented interactions on the blockchain. From buying a cup of coffee, taking a ride, to paying a blockchain Gas fee, any of these could technically trigger tax obligations, placing ordinary users in the gray area of compliance anxiety. The general consensus within the industry is that this system is quietly stifling the space for crypto to become a mainstream payment tool.

A cup of coffee also requires tax reporting: the institutional mismatch of small transactions

Under the current rules in the United States, crypto assets are viewed as "property" rather than "currency", meaning that each time a coin is used for a purchase, it theoretically requires calculating capital gains or losses. If users buy coffee, take a ride, or pay for streaming subscriptions with BTC, ETH, or other tokens, from the perspective of tax law, it is equivalent to selling the asset before consuming, and the price fluctuation becomes a taxable event. The technical logic is rigorous, but the practical application is extremely cumbersome.

The more complicated problem pointed out by Faryar Shirzad is that even paying Gas fees or transacting with dollar-pegged stablecoins for everyday transactions could be interpreted as triggering tax obligations. Every time users interact on-chain—authorization, transfer, settlement—they could be embedded in a complex calculation of cost bases and price differences; this compliance nightmare far exceeds the general understanding of "everyday payments." For ordinary people, recording every price change for a few dollars in fees is not only unrealistic but runs counter to the convenience that payment should seek.

The historical origins of this set of rules are very clear: it was born in an era serving investment activities and large asset management, focusing on holding gains, asset disposals, and long-term allocations, without assuming that someone would use such "property" to complete every small, high-frequency daily payment. Therefore, when the crypto network began to take on payment and settlement functions, the tax design originally biased towards investment scenarios became misaligned with the realities of usage.

Voices within the industry generally believe that while it is theoretically possible to require itemized reporting, in reality, it is nearly impossible for ordinary users to truly comply, and tax authorities would find it equally difficult to enforce effectively. Users are either deterred by compliance anxiety or pushed into a “technically non-compliant” state without realizing it, ultimately creating a gray area that everyone knows about but finds hard to acknowledge, weakening both the system's credibility and its execution effectiveness.

Tax customer service overwhelmed: a data profile of compliance anxiety

Coinbase has provided a set of internal data in its external communications: the platform's tax-related customer service inquiries have increased by 34% year-on-year. This number is still self-reported by the platform and awaits validation by independent organizations, but it at least outlines a profile—anxiety surrounding crypto taxation is rapidly amplifying. Many users, before tax season, are already overwhelmed by the questions of “should I report it, and how should I report it.”

At the practical operation level, the issues go far beyond “how much did I earn.” When users switch between multiple platforms, chains, and currencies, it is challenging to clarify the cost basis of each transaction, and they are also unsure how to report the price differences when exchanging different tokens, let alone how to consolidate historical transaction records across platforms. Coinbase disclosed that about 63% of users have gaps in their cost basis records, but this proportion is explicitly marked as an internal estimate, and the statistical methods used have not been disclosed, so caution is needed when referencing this data.

Aside from user confusion, regulatory pressure is also rapidly accumulating. Around the "broker reporting" framework, the U.S. tax system is expected to introduce new forms for crypto assets in the 2025 tax year, with 1099-DA being the most frequently mentioned. Coinbase anticipates that this tax year may generate millions of 1099-DA forms, but this also falls under projected data, with significant uncertainty regarding actual implementation. Nevertheless, simply regarding expected volume, it is already sufficient to indicate that the burden of data collection and transmission on regulators and platforms will be significantly amplified.

The collective implication of these numbers is that compliance anxiety is no longer just a problem for a few "professional players", but a systemic symptom that is widely spreading during the process of mass adoption. For taxpayers, it is a real challenge of how to avoid pitfalls; for tax authorities, it is about how to manage an exponentially growing amount of report data without paralyzing the system.

From investment assets to payment networks: old tax systems struggle to keep up with new narratives

If we extend the timeline, the role of crypto assets in the U.S. regulatory landscape has undergone a significant transformation: from being regarded as highly volatile speculative assets to today evolving into the infrastructure supporting on-chain finance and payment networks. With the rise of DeFi, payment channels, and on-chain settlement networks, the perspective of treating it merely as an investment is no longer sufficient to cover all its functions.

Faryar Shirzad openly stated that “the tax law framework that regards crypto assets as ‘property’ is no longer adaptable to the industry's development”. The technological evolution has pushed crypto towards more frequent and everyday usage scenarios, while the institutional framework still remains focused only on the buying and selling prices—this misalignment that could be overlooked when market scale was small becomes a structural obstacle once on-chain activities expand.

In traditional investment scenarios, this framework could still barely operate—users settle several trades a year and, with the aid of professional software and platform reports, can complete their filings. However, when crypto assets are used as a high-frequency payment medium or on-chain application "fuel", the same rules almost completely choke the mainstream users' willingness to engage. No one would maintain a tax ledger that is meticulous to the seconds and price points for daily multiple small payments.

Therefore, a consensus has gradually formed within the industry: the tax law has not kept pace with technological advancements, which not only limits user experience but also quietly undermines the U.S.'s competitiveness in the next-generation financial infrastructure race. Other jurisdictions are exploring more streamlined reporting mechanisms or dedicated crypto tax frameworks, while the U.S. risks inadvertently pushing innovation activities overseas if it continues to adhere to its old perspectives.

Coinbase bets on legislation: rewriting the rules in Washington

Against this backdrop, Coinbase has chosen to proactively advocate for a legislative path. Faryar Shirzad's core appeal to U.S. lawmakers is to set reasonable tax exemption thresholds for small, everyday, technical on-chain operations, and simplify reporting pathways. In other words, not to drag every payment at a few dollar levels or purely technical on-chain operations into complicated capital gains calculations.

From its own role, Coinbase, as a compliant trading platform, has to bear increasingly heavy regulatory reporting obligations, generating and transmitting vast amounts of trading and holding data to tax authorities; on the other hand, it also recognizes that if it does not reduce the reporting complexity for ordinary users in the design of the system, the potential scenarios for crypto assets to serve as payment and application carriers will be difficult to fully develop. The platform's business logic and users' experience demands are highly aligned on this point.

This public shout is not an isolated incident but is embedded in a larger round of regulatory framework negotiations in Washington: the tug-of-war between legislators, regulatory agencies, and the industry has lasted for some time over the definitions of "broker," new forms of reports, and stricter identity verification requirements. It needs to be emphasized that there are currently no confirmed details of any submitted or passed specific tax reform provisions in the public domain; what Coinbase advocates are more like a set of directional principles and priority rankings.

Equally important is that up to now, there has been no authoritative information regarding legislative progress or formal responses from regulatory agencies. Both the scheduling of Congress and discussions within tax authorities are in a state of information opacity. Under these conditions, it can be confirmed that this round of negotiations surrounding crypto tax regulations is still lingering in the agenda shaping and public mobilization stage and has yet to reach the voting and execution levels.

Who pays the bill: retail investors, developers, and the redrawing of the innovation landscape

At the individual level, the ones most affected are retail investors and ordinary users. Under the operation combinations of multiple platforms, chains, and currencies, they have spent a considerable amount of time and money to organize as complete a tax record as possible: exporting reports, reconciling, supplementing missing cost bases, and then handing over to professional tax services or software for processing. Even so, it is still difficult to completely avoid potential legal risks due to record gaps or misunderstandings.

For DeFi and application developers, the tax system is also subtly changing product boundaries. To avoid excessively frequent potential taxable events, teams often need to compress on-chain interaction frequencies when designing products, weakening some features that could have enhanced user experience, or shifting portions of logic off-chain, thereby sacrificing user experience and product innovation space. Tax rules should be a "background condition," but they are gradually evolving into a hard constraint within product logic.

More long-term chain reactions include the geographical choices of project teams and high-net-worth users. If certain jurisdictions offer a more clear and friendly crypto tax environment, both protocol development teams and large liquidity providers will be motivated to move their company registrations, team locations, or fund custodians. What gets moved are not just tax bases, but also bundled narrative rights, ecosystems, and high-end positions.

These spillover effects are hard to directly observe in short-term tax reports—the tax authorities may see only the measurable reported amounts and compliance fines. But the truly high cost is the underestimated "invisible costs": the loss of innovative projects, the migration of core developers, and the dilution of the U.S.'s influence in the global crypto narrative system. These costs are often only reviewed years later in the form of "what was missed."

Between tax forms and public chains: how the U.S. can reconstruct balance

In summary, treating crypto assets uniformly as property under the current tax system has already shown structural failure in an era where small high-frequency trading has become the norm. Ordinary users are left uncertain in gray compliance zones, unsure whether to strictly report every transaction or accept a "technically non-compliant but generally accepted" default state. In this tug-of-war between institutions and technology, they have become the most direct losers.

Coinbase's public appeal is essentially promoting the United States to find a new balance between "maintaining the tax base" and "releasing innovation." How to ensure that national tax revenue is not eroded while not placing excessively heavy shackles on the new generation of financial infrastructure is the core dilemma facing lawmakers. Technology has already provided tools that can support granular measurement, but whether the institution chooses to use these tools in a "smarter" way remains an open question.

Looking to the future, paths often discussed in the market include setting tax exemption thresholds for everyday small payments, launching simplified reporting tools for on-chain activities, and even constructing a dedicated crypto tax framework independent of traditional property tax logic. However, based on current publicly available information, these solutions remain at the level of discussion and advocacy, and have not yet entered concrete legislative processes, let alone any confirmed versions that have been implemented.

What truly needs to be questioned is: in the current situation where the world is gradually entering a race for crypto tax systems, if the United States hesitates to rewrite the rules, will it unconsciously hand over the center of the next round of financial infrastructure? As the tension between tax forms and public chains gradually tears apart the existing order, the answer to this question may determine not just the direction of an industry, but also the United States' position in the future financial landscape.

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