ConsenSys, the parent company of MetaMask, said that it does not collect taxes on crypto transactions as Reddit-fuelled rumours claimed.
Web3 software giant ConsenSys took to Twitter last night to dispel the rumour that MetaMask collects taxes on crypto transactions. Rumours started swirling on the r/cryptocurrency Reddit thread on May 21 after users noticed a section of MetaMask’s terms of service which read that MetaMask “reserved the right to withhold taxes where required”.
Several Reddit users misinterpreted this to relate to income tax rather than sales tax. The thread dramatically (and incorrectly) claimed: “MetaMask will hold your crypto, if you haven’t pay taxes. This was added when they adjusted their terms of service!“
The rumour naturally found itself plastered over Twitter as well as Reddit.
Correcting the misinformation, ConsenSys tweeted: “Let’s clarify one thing upfront: MetaMask does NOT collect taxes on crypto transactions and we have not made any changes to our terms to do so. This claim is false.”
It admitted that the “legal terminology can be complex”, but clarified that the section “does not apply to MetaMask or any other products that don’t involve sales tax”.
The tax section of its terms has nothing to do with on-chain crypto transactions.
ConsenSys added: “The tax section in our terms of service falls under the “fees and payment” section, and it exclusively pertains to products and paid plans offered by ConsenSys. For example, Infura has credit card developer subscriptions which include sales tax.”
While the rumour spread quickly, others realised that even if MetaMask wanted to withhold funds (which it doesn’t), it wouldn’t be possible because it would require access to seed phrases. MetaMask is non-custodial, so it does not store the private keys of its users.
As an emerging industry, taxation laws surrounding cryptocurrency can be murky and confusing. In general though, individuals who invest in cryptocurrencies are typically obligated to report and pay taxes on their capital gains in most countries. In the UK, HMRC outlines that crypto assets may be subject to both Capital Gains Tax and Income Tax depending on the specific transaction.
Several prominent exchanges, such as Coinbase and Binance.US, also share user trading data with the U.S. Internal Revenue Service (IRS), and they sometimes offer tax forms to their clients.
ConsenSys said: “We believe in transparency and accuracy when it comes to sharing information with our users. Our commitment to combat misinformation about our products and services remains unwavering.”
Disclaimer: CryptoPlug does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.