In April 2023, ConsenSys, the parent company of Metamask, updated the Terms of Use for the popular cryptocurrency wallet. The update included user obligations, applicable laws, and Metamask’s rights to modify terms and terminate services at any time. Of particular concern was section 4.3, which addressed taxation responsibilities. This section outlined the responsibilities of both users and ConsenSys in tax-related activities, and it highlighted the company’s right to collect taxes when necessary.

The update faced a strong backlash from the cryptocurrency community. Twitter user @ashcryptoreal argued that Metamask was no longer decentralized as it started imposing taxes on user transactions.

In response, Metamask’s parent company asserted that they “do not collect taxes on crypto transactions and have not made any changes to the terms to do so.” Metamask clarified this in a tweet, stating that the claim was false.

ConsenSys, the parent company, emphasized that their goal was to make web3 accessible and user-friendly through their suite of products. They clarified that the referenced terms were not new and applied to their products subject to sales tax.

The tax section in their terms of service fell under the “fees and payment” section, specifically related to products and paid plans offered by ConsenSys. For instance, Infura offered credit card developer subscriptions that included sales tax.

ConsenSys highlighted that the tax section did not apply to MetaMask or any other products that did not involve sales tax. They stressed the importance of transparency and accuracy in sharing information with their users. The company remained committed to combating misinformation and encouraged users to visit their website for more information and to reach out with any questions or concerns.

While MetaMask users were not required to pay consumption taxes, cryptocurrency investors were obligated to report and pay taxes on profits in most countries and jurisdictions. Major exchanges like Coinbase and Binance.US submitted user transaction activities to the US Internal Revenue Service (IRS). Typically, these companies provide forms that customers can use for self-reporting taxes.

The cryptocurrency community’s concerns regarding the new terms of Metamask and ConsenSys revolved around the potential imposition of taxes on user transactions. However, the parent company clarified that the tax section in their terms of service only applied to products and plans subject to sales tax, not including MetaMask. The community’s concerns may have been based on a misunderstanding, and ConsenSys reaffirmed its commitment to providing reliable and truthful information to its users.