MetaMask dismisses claims of withholding taxes in crypto transactions

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ConsenSys, the creator of browser-based crypto wallet MetaMask, has denied that the company would withhold taxes on crypto transactions.

Responding to rumors on social media, ConsenSys maintained that MetaMask did not collect taxes on crypto transactions and emphasized that there had been no changes to their terms of service to enable such actions.

The controversy arose after several Twitter posts highlighted section 4.2 of MetaMask’s terms of use, incorrectly interpreting it as a tax withholding provision. The claim quickly gained traction on various platforms such as Reddit and YouTube.

“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,” ConsenSys said on Twitter.

The company further clarified that the tax section in their terms of service pertains to products and paid plans offered by ConsenSys and does not apply to MetaMask or any other products not subject to sales tax.

However, community members were quick to refute the claim, emphasizing the distinction between sales tax and capital tax.

“This should be referring to sales taxes and not capital tax, so when you buy anything online via your credit/debit card, different countries and states may have different sales tax regulations,” a Reddit user explained.

Security concerns

The misinterpretation of MetaMask’s terms of service drew comparisons to Ledger’s recent controversial feature for its hardware wallets, Ledger Recovery.

Although it was announced weeks ago, its official release has raised significant concerns among Ledger owners regarding the company’s security practices.

Ledger Recovery is an optional ID-based private key recovery service offered to users of Ledger hardware wallets. For a monthly fee of $9.99, users can back up their private seed phrases directly to their identity through three custodians. The service addresses the challenge of remembering the complex 12-word seed phrase required to recover cryptocurrency in case of loss or theft.

However, despite Ledger’s assurances that the feature is voluntary and users can still back up their seed phrases independently, many Ledger owners remain apprehensive about its implications for wallet security.

Some Twitter users are concerned about the security risks of opting into Ledger Recovery. Some argue that even enabling the service introduces vulnerabilities. One user expressed concern over the code path that could expose private key material, saying that hackers could exploit it.

Ledger co-founder Nicolas Bacca addressed these concerns during a Twitter Space session with other company executives.

He said that “this is not a backdoor at all because nothing will happen without your consent on your device.” Bacca also pointed out that the update did not increase the attack vectors on Ledger wallets.

Amid the debate, Solana co-founder Anatoly Yakovenko offered his perspective on owning a Ledger device. Yakovenko implied that users must place trust in the company to safeguard their private keys.

“If you trusted them before not to exfiltrate your keys, you can trust them now not to do it when that feature is off. I think the attack surface is about the same,” Yakovenko said.


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