Cryptocurrency exchange platform Coinbase is the latest big fish condemning Apple‘s policy of taxing every financial transaction in mobile apps, days after Elon Musk went on a tirade and even called out CEO Tim Cook. Twitter’s new CEO has since patched things up with Apple, but Coinbase’s tussle with the tech giant might send ripples throughout the crypto industry. Let’s get over the basics first.
Thanks to the app repository’s own- and mandatory- billing system, any mobile application listed on the App Store has to pay 15-30 percent of all in-app transactions to Apple. Be it subscriptions to services like Spotify or that cool new skin in Apex Legends, Apple diligently collects its App Store tax. Not every developer is happy about it, and thanks to Spotify’s very public displeasure with the policy, the EU is looking into Apple’s monopolistic ways.
The list of frustrated publishers and personalities is quite long, but it got a billionaire-grade boost when Musk started ranting about it on Twitter. A day later, Coinbase announced that Apple had blocked an update for its Wallet app on the pretext that the process of sending NFTs should be taxed. Coinbase says Apple wanted the gas fee payment to pass through its in-app transaction protocol, which would mean Apple gets to keep its cut. Except, gas fees are not your average in-app transaction. They’re volatile, and out of a regular crypto-flipping dude’s control. As Ethereum puts it, the gas fee allows the blockchain to operate, “in the same way that a car needs gasoline to run.” Experts say the new policy to block NFT transfers in the Wallet app is a mistake, and Coinbase has also expressed interest in sorting it out with Apple.
Taxing Crypto Gas Fees Makes No Sense
Historically, Apple has been fiercely protective of its App Store tax, and it is unlikely that the Coinbase Wallet situation is going to settle without some drama. Apple’s updated policies say “Apple may use in-app purchase to sell and sell services related to non-fungible tokens (NFTs), such as minting, listing, and transferring.” But here’s the weird situation with transferring NFTs. Unlike in-game items or subscriptions, which are used inside an app, NFTs don’t live inside the Coinbase Wallet. They are hosted on a blockchain like Ethereum or Solana, complete with an ownership record. When a user sells an NFT to a buyer, they are also transferring the ownership, and the record of it is permanently saved on the blockchain.
But what if someone is gifting an NFT? In such a situation, no financial transaction is involved between two parties, so it doesn’t technically qualify as a “sale” for which Apple should charge a tax. However, the ownership transfer still happens on the blockchain, and that requires paying a gas fee, out of one’s own wallet. The gas fee is paid by the user who is gifting an NFT and passing on its ownership. Apple wants a cut out of that. It is essentially like a situation where someone who bought an oven using the Amazon app on an iPhone decides to gift it to their grandma, but has to pay Apple a 15-30 percent fee for transferring the ownership.
The gas fee is not something that goes into Coinbase’s coffers, nor does the NFT owner benefit from it. It is the fee paid to run a blockchain that maintains a record of every digital asset. Users pay a gas fee to mint an NFT, buy or sell it, and make crypto transactions. Basically, everything crypto-related involves a gas fee, and that gas fee is wildly unpredictable. No particular crypto player has solid control over it, and it varies based on a number of crypto market factors. The App Store was not designed to handle “independent” transactions of that kind, but forcing it on NFTs hasn’t really been well-received. To be fair, gas fees should not ideally classify as a transaction, unless Apple is thinking of it as a bundle deal for everything related to cryptocurrencies.
