U.S. lawmakers discussed cryptocurrency tax policies during a Senate Finance Committee hearing on Wednesday, including potential tax exemptions for cryptocurrency transactions below a certain amount and how to classify income from staking services.
Coinbase's Vice President of Tax, Lawrence Zlatkin, urged the Senate committee to consider a "de minimis" tax exemption for cryptocurrency transactions under $300 to encourage their commercial use in payments and ensure that innovative activities occur within the United States. Zlatkin stated:
Lawmakers also discussed how to address an annual tax gap of approximately $700 billion by strengthening reporting requirements for cryptocurrency transactions, reducing tax exemptions, and potentially classifying income from staking services as labor income subject to progressive income tax.
Tax policy is a significant concern for cryptocurrency users, industry executives, and companies, as they remain uncertain about the tax implications of their activities and whether the IRS will penalize them for participating in the digital economy.
Massachusetts Senator Elizabeth Warren stated at the hearing, "Cryptocurrency holders have at least $50 billion in unpaid taxes each year."
Warren argued that if special tax exemptions were established for cryptocurrencies, other asset classes would be affected, as investors would abandon those asset classes in favor of the tax benefits associated with cryptocurrencies.
Warren added, "The Joint Committee on Taxation estimates that this proposal alone would result in a $5.8 billion tax increase for cryptocurrency investors."
Senator Warren linked the special tax exemptions for cryptocurrencies to money laundering, suggesting that these exemptions could provide cover for evading U.S. sanctions and the Financial Crimes Enforcement Network (FinCEN) regulations.
She concluded that no special tax exemptions should be granted to digital assets, and all gains from cryptocurrency transactions should be taxed under the existing framework for securities and commodity investments.
Related: Bitcoin Surges Amid U.S. Government Shutdown: Will BTC's Rally Continue?
Original: “U.S. Lawmakers Grapple with Cryptocurrency Tax Policy During Government Shutdown”
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