On March 27, 2026, Beijing time, Coinbase Chief Policy Officer Faryar Shirzad publicly called on U.S. lawmakers to rewrite U.S. cryptocurrency tax rules in the upcoming legislative cycle. In his view, applying a tax system born in the last century to high-frequency, programmable on-chain interactions has created unbearable compliance imbalances in reality. Shirzad summarized this misalignment with a phrase—“applying 20th-century tax rules to crypto assets is like trying to manage smartphones with typewriter rules,” which not only illustrates the absurdity of outdated systems to Congress but also provides a metaphor that can be quickly understood by non-technical audiences about the dilemmas faced by ordinary users and developers.

A Coffee Must Be Taxed: Old Rules

Under the current framework, the U.S. Internal Revenue Service IRS categorizes all cryptocurrencies as "property", meaning that any “disposition” could trigger a taxable event. In traditional contexts, “disposition” typically refers to one-off large asset transfers, such as selling stocks or real estate; however, when this definition is mechanically transplanted to the on-chain world, the problem becomes: almost every on-chain signature may technically constitute a “disposition” that needs to be recorded and reported.

This logic leads to a highly fragmented daily experience. Buying a coffee with crypto, making a small tip payment, swapping coins on a cross-chain bridge, rebalancing in DeFi, or even just paying Gas fees to complete a transaction could strictly be seen as triggering potential capital gain calculation obligations. For high-frequency users, over the course of a year, these small transactions add up to a tax bill fragmented into countless pieces, rather than a few easily reconcilable traditional investment transaction records.

On a practical level, ordinary users and developers have already deeply felt the friction of this system. Users need to track cost bases across different wallets and chains, attempting to find a “purchase price” and “sale price” for each small interaction, while many tools do not seamlessly cover all scenarios; developers, when designing products, must repeatedly ask themselves: if every click could potentially become a taxable event, would users still dare to engage? The root of the problem lies in the fact that this tax system was originally designed for low-frequency, clearly defined asset transfer scenarios, which is naturally misaligned with the minute- and second-level interaction rhythm of the on-chain world.

Coinbase's Bet on Reform

In such a context, Coinbase encapsulates its reform appeal in three directions: optimizing the information reporting mechanism, redefining the tax treatment of certain crypto assets, and establishing low-value tax exemptions. This is not simply a call for “tax reduction” but an attempt to reconstruct a compliance framework more closely aligned with actual on-chain behaviors. In terms of information reporting, Coinbase hopes to move from the current state of “nobody can report clearly or reconcile” to a model where roles between the platform and taxpayers are clearer and more reasonably divided.

On the user side, Coinbase aims to reduce the psychological and operational burden of having to calculate every daily payment and on-chain interaction. It hopes to design systems such that people buying a coffee with crypto, taking a subway, or paying Gas for an on-chain interaction need not worry during tax season about reconciling historical records item by item, only having to enter into more fine-tuned tax calculation processes when an investment activity resulting in significant gains occurs.

For exchanges and other service platforms, the reform of the information reporting mechanism also signifies a reshaping of compliance structures. Coinbase argues that clearer reporting rules and form designs can enhance the usability and comparability of tax data without increasing overall friction, allowing regulatory agencies to stop relying on “magnifying every on-chain operation” for risk monitoring. As for certain crypto assets, especially forms closely related to payment and settlement, once their tax attributes are more clearly defined, it will directly impact the development path of the payment and DeFi ecosystem, but at this current stage, Coinbase has deliberately avoided debates over specific tax rates or exemption thresholds, focusing instead on the principles of “getting the rules written correctly.”

Typewriter Rules for Smartphones: Coinbase's Narrative Chips

The metaphor proposed by Shirzad of “managing smartphones with typewriter rules” is not merely a catchy media headline, but a carefully designed narrative strategy aimed at legislators. By abstracting the complex issue of crypto taxation into a “generational conflict of systems,” he tries to evoke a bipartisan resonance: no one will deny that technology has transcended from the typewriter era to the smartphone era, so continuing to apply old rules to manage new tools appears neither realistic nor responsible.

In this narrative, Coinbase intentionally downplays the technical details of on-chain, while highlighting the political issue of “the disconnect between rules and reality.” It positions itself as a “situation explainer”: not advocating for privileges for a specific niche but reminding lawmakers that if the underlying logic is not updated, the suppression of innovation by the entire tax system will exceed what any company can endure. Through such framing, Coinbase seeks to recast what might originally be viewed as an “industry demand” into a public issue concerning the competitiveness of U.S. financial infrastructure.

This shift is particularly evident in the long-swaying regulatory background of cryptocurrency in the U.S. Previously, Coinbase had often passively appeared as a regulated subject in the context of hearings and enforcement actions, but now it is trying to appear as a proactive rule-shaping participant. At the discourse level, the core of this battle is not merely “whether to relax taxes,” but “how to define crypto assets”: should they be treated as single-dimensional tools for tax evasion to be guarded against, or should they be viewed as next-generation financial infrastructure to be guided? The different answers lead to completely different rules and regulatory attitudes.

Other Countries Are Already Easing Up: A Sense of U.S. Tax System Lag

In Coinbase's argumentation, an important backdrop is the global policy competition. Some jurisdictions have begun exploring exemptions or simplified paths for crypto taxation: some try setting tax-free thresholds for small daily payments, while others design looser thresholds and simplified reporting processes for on-chain transaction declarations. Although different countries have different models, the common goal is to reduce the friction costs of innovative activities without sacrificing tax base security.

For developers and project parties, the choice of registration and long-term operation locations essentially balances different regulatory and tax system combinations. Excessively high compliance costs and uncertainties will incentivize so-called regulatory arbitrage: teams moving to areas with clearer rules and more tax-friendly environments, or even deploying critical infrastructure beyond the reach of U.S. jurisdiction. This is not merely a tax rate issue, but a matter of compliance predictability and system user-friendliness.

If the U.S. continues to refine reporting and disclosure requirements for on-chain transactions while maintaining the traditional tax framework, it is likely to gradually lose first-mover advantages in key tracks such as crypto payments and on-chain settlements. Emerging projects may choose from the outset to land in other regions, and international capital will respond with more sensitive asset allocation adjustments to “tax friction.” In the long run, “tax friendliness” is quietly becoming one of the core variables in the reorganization of the crypto industry landscape, which is also the reality Coinbase aims to make U.S. policymakers acknowledge.

New Form 1099 on the Way: Compliance Flood and Fear

Starting in 2024, a new form has emerged in the U.S. tax system—1099-DA. Based on currently available information, the rough positioning of this form is to require certain platforms to report users' “disposition” of crypto assets to tax authorities, which is explicitly marked as “pending verification” in research briefs. Even so, it is still seen as a landmark action for extending the U.S. tax system into the crypto domain, indicating that regulators are attempting to grasp on-chain economic activities in a more digital manner.

The problem is that if the underlying old tax law logic remains unchanged, while ramping up requirements at the reporting level, ordinary users often feel not “compliance becomes clearer,” but rather the psychological pressure of “every on-chain operation being magnified.” Even if it is practically impossible for tax authorities to trace every Gas payment, this fear of “theoretically being magnified” alone is enough to suppress some naturally occurring on-chain activities.

In this sense, Coinbase's push for information reporting reform is both a response to the trend of regulatory digitization and a request for a more executable rule framework. It does not deny that regulators need more complete data but emphasizes that if actions requiring fine reporting and those that can be simplified or exempted are not clarified at the tax law level first, then even the most fine-tuned 1099-DA system will simply transform systemic contradictions into compliance anxiety for users and platforms. Due to concerns over information gaps and risks, this discussion intentionally avoids specifics on the data matching mechanisms and impact scale of 1099-DA and focuses on principles and direction.

Tax Bill or Boarding Pass: A Fork in the Fate of Crypto Users

Returning to the starting point of this controversy, the conflict can be summarized in one sentence: the old tax law is slicing on-chain life into countless taxable fragments, while Coinbase seeks to piece these fragments back together into an executable rule framework. The former results in every click bearing a theoretical compliance burden; the latter attempts to concentrate tax obligations on key nodes that truly constitute investments and realizations of gains through reasonable tax-free thresholds, categorization treatments, and optimized information reporting. The differences between the two determine whether ordinary people can confidently use on-chain tools as day-to-day infrastructure.

At a more macro level, the tax system itself serves both as a constraint and as a boarding pass. The U.S. can choose to treat it as a tight restraint, using high-friction compliance costs to restrict the spread of new financial tools; or it can treat it as a boarding pass, providing a predictable growth environment for the next generation of financial infrastructure through rule designs that align better with on-chain characteristics. Coinbase’s voice in this matter is just one node in a long-term game: subsequently, it will depend on whether Congress's legislative window truly opens, whether the industry can form broader alliances, and whether users are willing to turn their compliance dilemmas into policy feedback.

Shirzad's metaphor of “typewriters and smartphones” ultimately points not to technical romance, but to institutional choices: faced with the “smartphones”—on-chain accounts, crypto wallets, and globally 24-hour operational settlement networks—already in everyone’s hands, will the U.S. cling to the rules of the typewriter era or acknowledge that the times have changed? The answer will be specifically written down in every revision of U.S. tax law in the coming years.

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