No, MetaMask isn't going to hold your crypto to pay taxes.

Much fuss has been made lately about MetaMask updating their terms of use. In particular, this clause:

4.3 Taxes - Each party will be responsible, as required under applicable law, for identifying and paying all taxes and other governmental fees and charges (and any penalties, interest, and other additions thereto) that are imposed on that party upon or with respect to the transactions and payments under this Agreement. All fees payable by you are exclusive taxes unless otherwise noted. We reserve the right to withhold taxes where required.

https://metamask.io/terms-of-use/

To understand the context, we must look at the entire section this clause belongs to:

https://i.imgur.com/E1uj7py.jpg

They're very clearly talking about sales tax on "offerings" available on their website. Offerings being defined as the optional products and services available to users:

https://i.imgur.com/ezo7ddZ.jpg

Indeed, we can see just last week MetaMask expanded its offerings to integrate direct crypto purchases with PayPal:

https://cointelegraph.com/news/metamask-rolls-out-eth-purchases-via-paypal-to-us-users

Furthermore, we must apply basic logic to these allegations. It is claimed that MetaMask has the ability to withhold your crypto assets for tax purposes. This is a problematic line of thinking for two reasons.

1. MetaMask's source code is freely available and reproducible, yet we are not seeing any changes to the codebase that would facilitate crypto freezing

https://github.com/MetaMask/metamask-extension

1. If MetaMask did implement a crypto-freezing feature, it would be easily circumvented as users could simply import their private key in a different wallet app and move their crypto freely

Thanks for reading.

Update: MetaMask parent company has clarified this on Twitter:

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. Legal terminology can be complex, but it's crucial to emphasize that this section DOES NOT apply to MetaMask or any other products that don't involve sales tax.

https://nitter.net/ConsenSys/status/1660353688446050304