Hi,
coinbase wallet app (not the trading platform, but the separate wallet app) recently introduced a new function that allows conversion between erc-20 tokens such as usdc, dai, etc..
my question is 1) does this actually get reported to irs like the trading platform does when you make a trade. I assume no since the wallet is anonymous, they cant really report it. 2) is this considered a tax event by irs? if i convert say from usdc to dai, it's just a 1:1 conversion, do i have to report it to irs
Yeah this kind of feature within the wallet is still considered as trading as you can profit from these kinds of conversion even if it didn't happen in a trading platform. As long as it doesn't involve in the normal operations of crypto which is sending and receiving the crypto itself and it involves selling/buying/trading the crypto you will be incurring taxable income. And yes this kinds of conversion should be reported to your proper Taxing authorities so you need to keep in record of the conversions you are doing within the app as proof and documentation of the trading you are doing.