Taxes targeting DeFi investments would be awfully difficult says Coinbase VP
As the public gets new ways to invest their money governments are trying to figure out how to find and tax it all, but in a DeFi world this isn't easy.
Key takeaways
- Talking about new rules proposed by the Biden Administration earlier this year, Zlatkin said that collecting information from DEX users would be difficult.
- The proposed rules would therefore also target DEXs like Uniswap.
- The proposal targeting DEXs has rattled some in the DeFi world.
Cite or link to this article
Griffin, M. (2023) 'Taxes targeting DeFi investments would be awfully difficult says Coinbase VP', 311 Institute, 13 November. Available at: https://www.311institute.com/taxes-targeting-defi-investments-would-be-awfully-difficult-says-coinbase-vp/ (Accessed: 1 October 2026).
The Decentralised Finance (DeFi) industry would be “awfully challenging” for American tax authorities to survey, Coinbase’s top tax lawyer has said.
A proposal from the US Department of the Treasury and the Internal Service Revenue (IRS) to target crypto exchanges is ultimately impractical says Lawrence Zlatkin, who is Vice President of Tax at America’s biggest cryptocurrency exchange.
Talking about new rules proposed by the Biden Administration earlier this year, Zlatkin said that collecting information from DEX users would be difficult.
The Future of Finance and DeFi, by Keynote Matthew Griffin
“It’d be awfully challenging to actually do that with them being peer to peer,” he added. “Let’s forget whether they shouldn’t be, how they would is an open question as well.”
Ultimately, he said Decentralised Exchanges (DEXs) shouldn’t be singled out when it comes to tracking gains and losses for traders and investors.
“I don’t think a decentralised, peer to peer private network should be treated differently,” he said.
Zlatkin’s comments come following a letter he penned last week saying that the U.S. government has an “overarching expansive view” about collecting gains on taxes. He described the proposal as an “unprecedented, unchecked, and unlimited tracking on the daily lives of Americans.”
Top cryptocurrency exchanges may soon have to report customer information to the IRS under the rules proposed by the Biden Administration earlier this year, which have rattled crypto big wigs and some lawmakers. The proposal aims to “close the tax gap” by targeting what American taxpayers make from their investments.
As part of the proposal, new rules would revise the definition of a “broker” by asking digital asset platforms that facilitate the buying and selling of crypto to track and report key information, which is currently how it works with stock and bond brokers.
The proposed rules would therefore also target DEXs like Uniswap. DEXs are a big part of the DeFi industry; unlike centralised exchanges like Coinbase or Binance, they allow users to trade digital coins and tokens without signing up and giving personal information like a name, address, or providing a government ID.
The proposal targeting DEXs has rattled some in the DeFi world.
The other day, Washington, D.C. non-profit Defi Education Fund said on Twitter that “the proposed ‘broker’ rulemaking… must be stopped” because it would raise “serious tax policy and privacy concerns.”
What this means for your organisation
Peer to peer resists oversight.
Decentralised exchanges have no central operator to collect data. That makes traditional reporting rules hard to apply. Regulators will look for other pressure points.
Reporting rules will tighten.
Governments want to track crypto gains like other investments. Exchanges and firms holding crypto should expect more reporting. Build compliance capability before rules land.
Privacy and tax will clash.
Coinbase sees the proposals as a threat to privacy. Expect a long fight over data and personal freedom. Firms should follow the debate and plan for several outcomes.
Three questions for your next leadership meeting
- What crypto exposure does our business have, and how is it reported?
- Are we ready for stricter tax reporting on digital assets?
- How would tighter DeFi rules affect our customers or products?
The trends and technologies behind this story
From the 311 Starburst, the 311 Strategic Intelligence Unit’s map of the technologies and trends shaping the next 50 years.
Analysis by the 311 Strategic Intelligence Unit, from Matthew Griffin’s article and 311 data. First published on Fanatical Futurist.
FAQ
Why does this matter?
As the public gets new ways to invest their money governments are trying to figure out how to find and tax it all, but in a DeFi world this isn't easy.
About the author
Matthew Griffin Founder, President and Futurist, 311 Institute
Matthew Griffin is a multi-award winning Futurist and expert in Disruption and Innovation, Geopolitics, Leadership, and Technology, who NASA have described as a "walking encyclopaedia of the future" and a "futurist Polymath."
Read full bio
Matthew Griffin is a multi-award winning Futurist and expert in Disruption and Innovation, Geopolitics, Leadership, and Technology, who NASA have described as a "walking encyclopaedia of the future" and a "futurist Polymath." 17-time best selling author of the "Codex of the Future" series, Matthew is the Founder, President and Futurist of the 311 Institute, a global Futures and Deep Futures advisory firm working with royal households, world leaders, G7, G20, and G77 governments, NGOs, and multi-national mid and mega cap firms to help them explore, shape, and lead the next 50 years of business and society.
An award-winning YouTube creator with over a million followers, with an unrivalled global reach and impact, Matthew is a highly sought-after international keynote speaker, lecturer, and mentor who collaborates with global leaders through the United Nations Alliance of Civilizations (UNAOC) and United Nations General Assembly (UNGA) to shape pivotal initiatives such as the UN’s AI for Humanity programme, the United Nations Conference of the Parties (UN COP), and the World Economic Forum in Davos.
As the former Global Head of Cloud, National Security, and Enterprise Sales for companies including Atos, Dell-EMC, and IBM, Matthew has a proven track record of building multi-billion dollar business units and turning failing divisions into market leaders. His ability to identify, analyse, and communicate the implications of hundreds of emerging technologies and trends is unparalleled, and his insights are trusted by many of the world’s most respected organisations, including ABB, Accenture, Adidas, AON, ARM, BCG, Centrica, Citi, Coca-Cola, Dentons, Deloitte, Dow Jones, EY, Google, KPMG, Lego, Legal & General, LinkedIn, Microsoft, PepsiCo, Qualcomm, RWE, Samsung, Siemens AG and Siemens Energy, T-Mobile, UBS, VISA, Walmart, Workday, Worldpay and many others.
Regularly featured in the global media including the AP, BBC, Bloomberg, CNBC, Discovery, Forbes, Khaleej Times, Telegraph, TIME, ViacomCBS, WIRED, and the WSJ, Matthews mission is to help organisations create a fair and sustainable future whose benefits are shared by everyone irrespective of their ability, background, or circumstances.
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Sources and further reading
- Coinbase Comment Letter scribd.com
- said twitter.com
Source: first published by the 311 Institute on 13 November 2023. Cite as: Griffin, M. (2023). Taxes targeting DeFi investments would be awfully difficult says Coinbase VP. 311 Institute. https://www.311institute.com/taxes-targeting-defi-investments-would-be-awfully-difficult-says-coinbase-vp/
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