On October 1, 2025, the U.S. Senate Finance Committee held a hearing titled "Examining the Taxation of Digital Assets," chaired by Committee Chairman Mike Crapo. The list of participants included representatives from policy research, legal practice, trading platforms, and industry associations. From the development history of U.S. digital asset tax policy and the current state of cryptocurrency taxation, this meeting served as a concentrated expression of existing industry demands and reflected future regulatory trends. The discussions 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. Broad Topics: Overview of Perspectives from the Hearing

1. De Minimis Exemption

Topic: Current tax law requires taxpayers to track and report all digital asset transaction gains on a per-transaction basis. Should a de minimis exemption threshold be established for low-value transactions (e.g., under $200), similar to Section 988 of the Internal Revenue Code regarding foreign currency transactions?

Main Points:

Jason Somensatto (Coin Center): Pointed out that cryptocurrency payments are treated as asset sales for tax purposes, making it nearly unmanageable for users to calculate cost basis and capital gains for every purchase or fee payment. He believes that introducing a de minimis exemption could make cryptocurrency feasible for retail payments, arguing that a mature framework already exists for foreign currency transactions, and extending its application would not weaken the tax system.

Lawrence Zlatkin (Coinbase): Explained from a compliance perspective that Coinbase processes billions of microtransactions annually, and calculating gains on a per-transaction basis would make it impossible for both the platform and users to meet disclosure requirements. He believes that establishing a threshold is a necessary step to reduce systemic friction.

Andrea S. Kramer (ASKramer Law): Opposed from a legal consistency standpoint, stating that IRC §61 explicitly requires that "income from all sources" be included in the taxable range, and exemptions must have a clear legal basis. She expressed concern that a small exemption could become a tax avoidance channel, as tax authorities would find it difficult to distinguish between split transactions and genuine payments.

Sen. Elizabeth Warren (Senator): Added concerns regarding fiscal impact, arguing that large-scale exemptions could result in billions of dollars in lost revenue, effectively serving as a hidden subsidy for the cryptocurrency industry.

Mike Crapo (Chairman): Believed that the core issue lies in enforceability rather than ideology, suggesting that technical solutions should be explored that can both alleviate compliance burdens and prevent evasion.

2. Taxation Timing for Mining and Staking Rewards

Topic: Current IRS guidance (Notice 2014-21) states that income from virtual currency mining is recognized "when received." With the rise of staking mechanisms, whether taxation should be adjusted to the time of disposal has become a focal point.

Main Points:

Lawrence Zlatkin (Coinbase): Advocated for delayed taxation, noting 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 spirit of tax law that taxes 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, making taxation at the time of receipt both unfair and unmanageable.

Andrea S. Kramer (ASKramer Law): Cited IRC §451 and related case law, emphasizing that as long as the taxpayer has complete dominion and control, it constitutes a taxable event. She believes that delaying taxation would create new temporal arbitrage opportunities.

Annette Nellen (AICPA): Proposed a technical compromise, suggesting that the Treasury establish a "safe harbor" to determine the tax point based on token liquidity and lock-up periods, and require disclosure.

Sen. Bill Cassidy, Sen. Hassan (Senators): Inquired whether the IRS could objectively assess liquidity, to which the response was that the industry could provide price sources and lock-up data for cooperation.

3. Information Reporting and Broker Definition

Topic: The Infrastructure Investment and Jobs Act (IIJA, 2021) requires "brokers" to report digital asset transaction information to the IRS, but the proposed rules by the Treasury include DeFi protocols, non-custodial wallets, and code developers, leading to controversy.

Main Points:

Lawrence Zlatkin (Coinbase): Pointed out that Coinbase supports third-party reporting, but if the definition is too broad, the IRS will receive a massive amount of noise data, making it impossible to identify real risks. He suggested starting with custodial platforms and then gradually expanding.

Jason Somensatto (Coin Center): Argued from a constitutional and privacy perspective that requiring decentralized protocols to report exceeds the authorization of the Bank Secrecy Act (BSA) and violates Fourth Amendment protections.

Andrea S. Kramer (ASKramer Law): Emphasized that regulatory goals should focus on intermediaries that can control the flow of funds; otherwise, enforcement costs would be too high.

Sen. Maggie Hassan (Senator): Believed that without widespread reporting, the IRS would be unable to establish a traceable system, increasing the risk of tax base erosion.

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: Current wash sale rules apply to securities and do not cover digital assets. Investors can create tax losses by quickly selling and repurchasing.

Main Points:

Sen. Chuck Grassley (Senator): Suggested that the rules should be extended to digital assets to prevent abuse.

Andrea S. Kramer (ASKramer Law): Noted 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): Believed that the transparent trading records of digital assets can be technically tracked, making them suitable for applying the rules.

Lawrence Zlatkin (Coinbase): Cautioned that the market impact should be assessed, as mandating a delayed repurchase period could weaken liquidity.

Jason Somensatto (Coin Center): Added that if the rules are extended, the IRS should simultaneously issue guidance on calculation and reporting to avoid enforcement confusion.

5. Mark-to-Market Valuation and Assessment

Topic: Should actively traded digital assets be included in IRC §475 or §1256 mark-to-market valuation systems to enhance transparency and reduce deferral?

Main Points:

Annette Nellen (AICPA): Supported the extension, arguing that mark-to-market valuation could eliminate valuation lags and improve tax matching; she suggested limiting it to highly liquid assets with publicly available price sources.

Andrea S. Kramer (ASKramer Law): Believed it could be piloted at the institutional investor level, observing the implementation effects before broader promotion.

Ron Wyden (Ranking Member): Questioned whether the IRS could establish an authoritative price source database, to which Nellen agreed that the AICPA could assist the industry in co-developing.

6. Stablecoins and Payment Compliance

Topic: Stablecoins are frequently used in payments and settlements; should capital gains tax be exempted for small payments?

Main Points:

Lawrence Zlatkin (Coinbase): Argued that stablecoins have minimal price volatility, making it unreasonable to tax them as property, and exemptions would help promote compliant payments.

Jason Somensatto (Coin Center): Added that limits and transaction record requirements could prevent evasion.

Sen. Elizabeth Warren (Senator): Expressed concern that exemptions could be exploited to split large amounts of funds, undermining reporting obligations.

Mike Crapo (Chairman): Suggested exploring a low-risk transaction exception to balance enforceability and compliance.

7. Charitable Donations and Valuation

Topic: Under current rules, taxpayers donating digital assets must submit a qualified appraisal. Should this requirement be exempted for donations of securities?

Main Points:

Annette Nellen (AICPA): Pointed out that actively traded assets already have publicly available prices, making repeated appraisals meaningless, and suggested exempting appraisals to reduce costs.

Andrea S. Kramer (ASKramer Law): Agreed with the suggestion but emphasized that non-liquid assets still require appraisal to prevent valuation manipulation.

Sen. Debbie Stabenow (Senator): Expressed support for Congress to study standardized valuation mechanisms to balance transparency and compliance efficiency.

8. Safe Harbor Design

Topic: Senators and witnesses repeatedly discussed the necessity of a "Safe Harbor" mechanism, aimed at providing predictable and operable compliance boundaries for specific transactions or behaviors. Participants noted that the digital asset space involves high technical complexity and valuation uncertainty, making it difficult to directly apply traditional standards; a safe harbor could serve as a transitional form for institutional implementation.

Main Points:

Annette Nellen (AICPA): Emphasized the "operability function" of the safe harbor. She believes that in the areas of staking and mining rewards, the safe harbor should clarify the tax point:

If token liquidity is insufficient or there is a lock-up period, income recognition can be delayed;

If tokens are immediately tradable, then income is recognized upon receipt.

She also suggested establishing a safe harbor in the lending and sourcing rules area to help taxpayers determine whether a transfer is taxable.

Lawrence Zlatkin (Coinbase): Advocated for establishing a safe harbor for digital asset lending, similar to the IRC §1058 securities lending system, to clarify tax exemptions for "non-sale transfers." He pointed out that the IRS currently lacks a clear definition for crypto lending, and some lending is mistakenly viewed as disposal; a safe harbor would help maintain market liquidity without sacrificing tax transparency.

Jason Somensatto (Coin Center): Supported introducing a "limited safe harbor" in reporting and compliance, suggesting that the Treasury allow a technical transition period when implementing the new reporting system (1099-DA) to avoid misclassifying non-custodial wallets or protocol parties as brokers. He emphasized that the safe harbor should be a "compliance incentive" rather than a permanent exemption.

Andrea S. Kramer (ASKramer Law): Acknowledged that the safe harbor is operationally feasible but warned that its "design scope must be strictly limited," or it could become a de facto industry exemption. She suggested clearly defining termination conditions, reporting obligations, and information disclosure requirements during its formulation.

Mike Crapo (Chairman): Concluded that the safe harbor mechanism could serve as an "institutional buffer" to achieve a balance between taxation and compliance, and further discussions should take place during the legislative process, especially regarding its application to emerging assets and hybrid transaction structures.

9. International Competition and Cross-Border Rules

Topic: Does an uncertain tax framework weaken the U.S. position in the global digital asset competition? How should cross-border staking and lending be defined in terms of source and taxation rights?

Main Points:

Sen. Cynthia Lummis (Senator): Pointed out that regulatory ambiguity is prompting businesses to relocate to the EU and Asia, urging the Treasury and IRS to clarify the system more quickly.

Lawrence Zlatkin (Coinbase): Added that compliant businesses need regulatory certainty the most; otherwise, they will be forced to move their operations.

Jason Somensatto (Coin Center): Believed that a stable tax system is a prerequisite for attracting long-term investment.

Annette Nellen (AICPA): Suggested that unclear source 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 task of the Finance Committee is to maintain both competitiveness and the integrity of the tax base.

II. Background Review: Evolution of U.S. Cryptocurrency Taxation

In recent years, as the scale of digital asset trading has continued to expand, the attention and scrutiny from U.S. tax authorities have increased correspondingly. A report released by the Treasury Inspector General for Tax Administration (TIGTA) in 2024 indicated that the IRS's tax assessments in income tax audits involving digital asset transactions rose from approximately $508,000 in the 2022 fiscal year to over $12.2 million as of May 2023. This trend not only reflects the increasing weight of digital assets in taxpayers' economic activities but also highlights the pressure the current tax system faces in adapting to new types of assets. In response to the expansion of the digital asset market, U.S. tax policy has not been established overnight but has evolved continuously with practice. Since the IRS first defined virtual currency as property in 2014, it has gradually issued regulations on issues such as hard forks, airdrops, information disclosure, and broker reporting obligations, building a regulatory framework to address emerging assets.

As of now, the U.S. cryptocurrency tax system has formed a relatively complete framework based on existing regulations. Qualitatively, virtual currencies are treated as property (Notice 2014-21), and sales, exchanges, or daily consumption require the calculation of cost and fair value to recognize capital gains or losses. In terms of income, mining, staking rewards, and airdrops are recognized as ordinary income, counted as current income upon receipt, and may trigger self-employment tax if conducted as a business activity. Regarding information reporting, the 2021 IIJA included digital assets in the broker reporting system, and in 2024, the Treasury and IRS introduced Form 1099-DA, requiring reporting of total transaction amounts starting in 2025, with an expansion to cost basis and gains/losses in 2026. It is important to note that the reporting of large receipts of digital assets under Form 8300 (§6050I) is currently still on hold. In terms of benefits 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 exemption policy similar to foreign currency transactions, nor has the wash sale rule been extended to digital assets.

Overall, the U.S. digital asset tax system has evolved from an early blank slate to a property classification, followed by gradual supplementation of rules, strengthening of information disclosure, and implementation of the broker system. Over the past decade, the IRS has continuously responded to new situations arising in the crypto market, such as forks, airdrops, mining, and payments, while Congress established the legislative foundation for broker information reporting through the Infrastructure Investment and Jobs Act… This series of changes has gradually brought digital assets from the margins of gray trading into the mainstream tax framework, but it has also led to increased compliance burdens and unclear institutional boundaries. On one hand, the Treasury and IRS have pushed for the implementation of the 1099-DA information reporting rules, which have sparked intense controversy, and the question of whether certain non-custodial entities should be included in "broker" obligations remains unresolved; on the other hand, there are proposals or public opinion collections within Congress for a "de minimis" exemption and extending "wash sale rules" to digital assets, indicating that lawmakers are seeking to find a balance between expanding the tax base and reducing burdens. It can be said that this hearing is both a response to the evolution of the system over the past decade and a prelude to the future direction of cryptocurrency taxation.

III. Potential Impact: Will the U.S. Cryptocurrency Market Welcome Better Tax Policies?

This hearing was not only a profound technical discussion but also a strategic dialogue about the positioning of digital assets within the U.S. tax system. The specific issues of de minimis exemptions for small payments, taxation timing for staking and mining, boundaries of information reporting, wash sale rules, and the applicability of mark-to-market valuation reflect three deeper sets of contradictions:

Innovation vs. Fairness: The industry hopes to reduce compliance costs and tax uncertainty to promote the implementation of new models such as payments, lending, and staking; policymakers are concerned that excessive concessions could undermine the consistency of the tax system and fiscal fairness.

Transparency vs. Privacy: The IRS needs third-party reporting to grasp the real transaction network, while the industry and some lawmakers worry that attempts to extend this to DeFi and non-custodial entities may be technically unfeasible and erode user privacy.

U.S. vs. Global: If U.S. rules remain ambiguous for an extended period, capital and innovation will shift to Europe and Asia; lawmakers remind that the U.S. cannot pursue "competitiveness" at the expense of the tax base and fiscal stability.

From a policy pathway perspective, in the short term, Congress may engage in further discussions on high-controversy points such as de minimis exemptions for small payments, taxation timing for staking, and lending safe harbors; in the medium term, whether wash sale rules and mark-to-market valuation will be extended to digital assets will be key to addressing tax loopholes; in the long term, the redefinition of brokers and the information reporting framework will determine whether the IRS can establish an executable compliance system for digital assets or continue to oscillate between insufficient data and limited enforcement.

It is foreseeable that the U.S. digital asset tax system is at a crossroads of patchwork repairs and systemic restructuring. This hearing may not lead to legislative breakthroughs, but it has brought core contradictions to the forefront. In the coming years, how the U.S. finds a sustainable balance between expanding the tax base and supporting innovation will not only influence the direction of domestic tax governance but also shape the compliance pathways of the global cryptocurrency market.

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