On October 1, 2025, the US Senate Finance Committee held a hearing titled "Examining the Taxation of Digital Assets," chaired by Committee Chairman Mike Crapo. The list of participants covered representatives from four levels: policy research, legal practice, trading platforms, and industry associations. Looking at the development history of US digital asset tax policies and the current state of crypto taxation, this meeting was both a concentrated expression of the industry's existing demands and a reflection of future regulatory trends. The discussion results on key issues such as digital asset reporting obligations, cost basis determination, and tax treatment will also play an important reference role in subsequent regulatory rule-making and congressional legislation.
I. Wide Range of Topics: A Look at Views from All Sides in the Hearing
1. De Minimis
Topic Content: Current tax law requires taxpayers to track and report gains from all digital asset transactions one by one. Should a tax exemption threshold be set for low-value transactions (such as under $200), similar to the provisions for foreign currency transactions in Section 988 of the Internal Revenue Code?
Main Views:
- Jason Somensatto (Coin Center): Pointed out that crypto payments are treated as asset sales for tax purposes, causing users to calculate cost basis and capital gains every time they buy goods or pay fees, which is almost impractical. He believes introducing a de minimis exemption can make crypto assets feasible for retail payments, with the argument that foreign currency transactions already have a mature framework, and extending it won't weaken the tax system.
- Lawrence Zlatkin (Coinbase): Explained from a compliance execution perspective that Coinbase handles billions of micro-transactions each year, and calculating gains one by one would make it impossible for platforms and users to meet information disclosure requirements. He thinks setting a threshold is a necessary step to reduce system friction.
- Andrea S. Kramer (ASKramer Law): Opposed from the perspective of legal consistency, pointing out that IRC§61 explicitly states that "income from all sources" should be included in taxable scope, and exemptions must have clear legal basis. She worries that de minimis could become tax avoidance channels, as tax authorities would have difficulty distinguishing split transactions from real payments.
- Sen. Elizabeth Warren: Added concerns about fiscal impact, believing that large-scale exemptions could cause billions of dollars in revenue loss, equivalent to implicit subsidies for the crypto industry.
- Mike Crapo (Chairman): Believes the core of the issue is enforceability rather than ideology, and we should study technical solutions that can both reduce compliance burdens and prevent evasion.
2. Tax Timing for Mining and Staking Rewards
Topic Content: The current IRS guidance (Notice 2014-21) stipulates that income from virtual currency mining is included at the "time of receipt." With the popularity of staking mechanisms, whether to adjust taxation to the time of disposal has become a focus.
Main Views:
- Lawrence Zlatkin (Coinbase): Advocates for deferred taxation, pointing out that most staking reward tokens have no secondary market or liquidity at the time of receipt, and immediate taxation would create "phantom income," violating the tax law's principle of taxing based on realization.
- Jason Somensatto (Coin Center): Added that the value of staking rewards fluctuates greatly, and the IRS lacks the ability to determine valuations accurately; taxing at receipt is neither fair nor operable.
- Andrea S. Kramer (ASKramer Law): Cited IRC§451 and related case law, emphasizing that as long as the taxpayer obtains complete dominion and control, it constitutes a taxable event. She believes postponing taxation would create new timing arbitrages.
- Annette Nellen (AICPA): Proposed a technical compromise, where the Treasury could establish a "safe harbor," determining the tax timing based on token liquidity and lock-up periods, and requiring disclosure explanations.
- Sen. Bill Cassidy, Sen. Hassan: Asked if the IRS can objectively judge liquidity, and the answer was that the industry can provide price sources and lock-up data to cooperate.
3. Information Reporting and Broker Definition
Topic Content: The Infrastructure Investment and Jobs Act (IIJA, 2021) requires "brokers" to report digital asset transaction information to the IRS, but the Treasury's proposed rules include DeFi protocols, non-custodial wallets, and code developers in the scope, sparking controversy.
Main Views:
- Lawrence Zlatkin (Coinbase): Pointed out that Coinbase supports third-party reporting, but if the definition is too broad, the IRS will receive massive noise data and be unable to identify real risks. He suggests starting with custodial platforms and gradually expanding.
- Jason Somensatto (Coin Center): From the perspectives of constitutionality and privacy, believes requiring decentralized protocols to report exceeds the authorization of the Bank Secrecy Act (BSA) and violates the Fourth Amendment protections.
- Andrea S. Kramer (ASKramer Law): Emphasized that regulatory goals should focus on intermediaries that can control fund flows, otherwise execution costs would be too high.
- Sen. Maggie Hassan: Believes that without broad reporting, the IRS cannot establish a traceable system, and the risk of tax base erosion would be greater.
- Ron Wyden (Ranking Member): Summarized that Congress needs to find a new boundary between transparency and enforceability.
4. Wash Sale Rules and Tax Avoidance Risks
Topic Content: Current wash sale rules apply to securities and do not cover digital assets. Investors can create losses for tax offsets by quickly selling and buying back.
Main Views:
- Sen. Chuck Grassley: Proposed extending the rules to digital assets to prevent abuse.
- Andrea S. Kramer (ASKramer Law): Pointed out that the high volatility of the crypto market makes tax harvesting easier, and extending the rules is a necessary step to maintain fairness.
- Annette Nellen (AICPA): Believes digital asset transaction records are transparent and can be technically tracked, making them equally suitable for the rules.
- Lawrence Zlatkin (Coinbase): Reminded to assess market impact, as mandatory delayed repurchase periods might weaken liquidity.
- Jason Somensatto (Coin Center): Added that if extending the rules, the IRS needs to issue calculation and reporting guidelines simultaneously to avoid enforcement chaos.
5. Mark-to-Market Valuation
Topic Content: Should actively traded digital assets be included in systems like IRC§475 or §1256 for mark-to-market accounting to improve transparency and reduce deferrals?
Main Views:
- Annette Nellen (AICPA): Supports extension, believing mark-to-market can eliminate valuation lags and improve tax matching; suggests limiting to assets with high liquidity and public price sources.
- Andrea S. Kramer (ASKramer Law): Believes it can start at the institutional investor level, observe execution effects, and then promote.
- Ron Wyden (Ranking Member): Concerned if the IRS can establish an authoritative price source database, Nellen agreed that AICPA can assist the industry in jointly formulating.
6. Stablecoins and Payment Compliance
Topic Content: Stablecoins are frequently used in payments and settlements; should small payment capital gains taxes be exempted?
Main Views:
- Lawrence Zlatkin (Coinbase): Believes stablecoin price fluctuations are minimal, and treating them as property for taxation is unreasonable; exemptions would help promote compliant payments.
- Jason Somensatto (Coin Center): Added that evasion can be prevented through limits and transaction record requirements.
- Sen. Elizabeth Warren: Expressed concerns that exemptions could be exploited to split large funds, weakening reporting obligations.
- Mike Crapo (Chairman): Proposed exploring a low-risk transaction exception to balance enforceability and compliance.
7. Charitable Donations and Appraisals
Topic Content: Under current rules, taxpayers donating digital assets must submit a "qualified appraisal." Should this requirement be exempted similar to securities donations?
Main Views:
- Annette Nellen (AICPA): Pointed out that actively traded assets already have public prices, and repeated appraisals are meaningless; exemptions would reduce costs.
- Andrea S. Kramer (ASKramer Law): Agreed with the suggestion but emphasized that non-liquid assets still need appraisals to prevent valuation manipulation.
- Sen. Debbie Stabenow: Expressed support for Congress to study standardized valuation mechanisms to balance transparency and compliance efficiency.
8. Safe Harbor System Design
Topic Content: Senators and witnesses discussed the necessity of a "safe harbor" mechanism multiple times, aiming to provide predictable and operable compliance boundaries for specific transactions or behaviors. Participants believed that the digital asset field has high technical complexity and valuation uncertainty, making existing rules hard to directly apply traditional standards, and safe harbors can serve as a transitional form for system implementation.
Main Views:
- Annette Nellen (AICPA): Emphasized the "operability function" of safe harbors multiple times. She believes in the areas of staking and mining rewards, safe harbors should clarify tax timing:
(1) If tokens have insufficient liquidity or lock-up periods, income confirmation can be deferred;
(2) If tokens can be traded immediately, maintain receipt as income.
She also suggested setting safe harbors in lending and sourcing rules to help taxpayers determine if they are taxable transfers.
- Lawrence Zlatkin (Coinbase): Advocated for establishing digital asset lending safe harbors, similar to IRC§1058 securities lending system, clarifying tax exemptions for "non-sale transfers." He pointed out that currently the IRS lacks clear definitions for crypto lending, and some lendings are mistakenly seen as disposals; safe harbors will help the market maintain liquidity without sacrificing tax transparency.
- Jason Somensatto (Coin Center): Supported introducing "limited safe harbors" in reporting and compliance areas, suggesting the Treasury allow technical transition periods when implementing new reporting systems (1099-DA) to avoid mistakenly identifying non-custodial wallets or protocol parties as brokers. He emphasized that safe harbors should be "compliance incentives" rather than permanent exemptions.
- Andrea S. Kramer (ASKramer Law): Acknowledged that safe harbors are feasible operationally but reminded that their "design scope needs to be strictly limited," otherwise they would become de facto industry exemptions. She suggested clearly defining termination conditions, reporting obligations, and information disclosure requirements when formulating.
- Mike Crapo (Chairman): Summarized that the safe harbor mechanism could be an "institutional buffer" to achieve balance between taxation and compliance, and should be further discussed in the legislative process, especially for application scenarios of emerging assets and hybrid transaction structures.
9. International Competition and Cross-Border Rules
Topic Content: Does an uncertain tax framework weaken the US's position in global digital asset competition? How to define sources and taxing rights for cross-border staking and lending?
Main Views:
- Sen. Cynthia Lummis: Pointed out that regulatory ambiguity prompts companies to move to the EU and Asia, requiring the Treasury and IRS to accelerate system clarification.
- Lawrence Zlatkin (Coinbase): Added that compliant companies most need rule certainty, otherwise they will be forced to relocate business.
- Jason Somensatto (Coin Center): Believes a stable tax system is a prerequisite for attracting long-term investment.
- Annette Nellen (AICPA): Pointed out that unclear sourcing rules for cross-border staking and lending could lead to double taxation and should align with OECD guidelines.
- Ron Wyden (Ranking Member): Summarized that the Finance Committee's task is to maintain both competitiveness and tax base integrity.
II. Background Review: Evolution of US Crypto Tax System
In recent years, as the scale of digital asset transactions continues to expand, the attention and scrutiny of US tax authorities have increased synchronously. A report released by the Treasury Inspector General for Tax Administration (TIGTA) in 2024 pointed out that in income tax audits involving digital asset transactions, the IRS's tax assessments have risen from about $508,000 in fiscal year 2022 to over $12.2 million as of May 2023. This trend not only shows the increasing weight of digital assets in taxpayers' economic activities but also highlights the pressures faced by the current tax system in adapting to new types of assets. Echoing the expansion of the digital asset market, US tax policies have not been achieved overnight but have evolved continuously with practice. Starting from the first definition of virtual currency as property in 2014, the IRS has successively issued norms on hard forks, airdrops, information disclosure, and broker reporting obligations, gradually building an institutional framework to address emerging assets.
As of now, the US crypto tax system has formed a relatively complete system based on existing regulations. In terms of characterization, virtual currency is treated as property (Notice 2014-21), and sales, exchanges, or daily consumption all require calculating cost and fair value to recognize capital gains or losses. In terms of income, mining, staking rewards, airdrops, etc., are recognized as ordinary income, included in current income at receipt, and if as business activities, may trigger self-employment tax. In terms of information reporting, the 2021 IIJA included digital assets in the broker reporting system, and in 2024, the Treasury and IRS launched Form 1099-DA, requiring reporting of total transaction amounts starting from 2025, and expanding to cost basis and gains/losses in 2026. It should be noted that Form 8300 (§6050I) regarding reporting of large digital asset receipts is currently still suspended. In terms of incentives and exceptions, long-term holdings can enjoy lower capital gains tax rates, and qualified charitable donations can be deducted, but there is no de minimis policy similar to foreign currency transactions, nor has the wash sale rules been extended to digital assets.
Overall, the US digital asset tax system has gone through an evolution from early blanks, to property characterization, then to gradual rule supplements, strengthened information disclosure, and implementation of broker systems. Over the past decade, the IRS has continuously responded to new situations in the crypto market such as forks, airdrops, mining, payments, etc., and Congress has established the legislative basis for broker information reporting through the Infrastructure Investment and Jobs Act... This series of changes has gradually brought digital assets from marginal gray transactions into the mainstream tax framework, but it has also brought real dilemmas such as increased compliance burdens and unclear institutional boundaries. On one hand, the Treasury and IRS have promoted the implementation of 1099-DA information reporting rules, sparking intense controversy in the process, and the issue of whether some non-custodial entities should be included in "broker" obligations remains unresolved; on the other hand, Congress has proposals or public comment solicitations for "de minimis," extending "wash sale rules" to digital assets, etc., showing that legislators are seeking a balance between expanding the tax base and reducing burdens. It can be said that this hearing is both a response to the institutional evolution of the past decade and a prelude to the future direction of crypto taxation.
III. Potential Impacts: Could the US Crypto Market Welcome Better Tax Policies?
This hearing was not only a deep technical discussion but also a strategic dialogue on the positioning of digital assets in the US tax system. Small payment exemptions, tax timing for staking and mining, boundaries of information reporting, wash sale rules, and the scope of mark-to-market application—these specific topics actually reflect three deeper sets of contradictions:
Innovation vs Fairness: The industry hopes to reduce compliance costs and tax uncertainties to promote the implementation of new models like payments, lending, and staking; policymakers worry about excessive concessions damaging the consistency and fiscal fairness of the tax system.
Transparency vs Privacy: The IRS needs third-party reporting to grasp real transaction networks, while the industry and some lawmakers worry that this extension to DeFi and non-custodial entities may be technically infeasible and erode user privacy.
US vs Global: If US rules remain ambiguous for a long time, capital and innovation will shift to Europe and Asia; lawmakers remind that the US cannot pursue "competitiveness" at the expense of tax base and fiscal stability.
From the policy path perspective, in the short term, Congress may engage in further negotiations on high-controversy points like de minimis, staking tax timing, lending safe harbors, etc.; in the medium term, whether to extend wash sale rules and mark-to-market to digital assets will be key to filling tax loopholes; in the long term, the reconstruction of broker definitions and information reporting frameworks will determine whether the IRS obtains an enforceable digital asset compliance system or continues to wander between data shortages and enforcement limitations.
It can be foreseen that the US digital asset tax system is at the intersection of patch-style fixes and systemic reshaping. This hearing may not bring legislative breakthroughs, but it has also brought core contradictions to the forefront. In the coming years, how the US finds a sustainable balance between expanding the tax base and supporting innovation will not only affect the direction of its own tax governance but also shape the compliance paths of the global crypto market.
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