Earlier this month, the crypto industry responded to the Senate Finance Committee’s request for comment on tax rules related to digital assets. This is a significant development in the intersection of cryptocurrency and government. The leaders of the Senate Finance Committee, Sens. Ron Wyden (D-Ore.) and Mike Crapo (R-Idaho), published an open letter in July, seeking input from the crypto industry on tax issues such as loans, staking, mining, constructive sales, and wash trading. The deadline for comments was earlier this month. This public comment period indicates that the Senate Finance Committee is taking the first step toward potential legislation or hearings on crypto taxation in the United States. The industry sees this as a crucial barrier to broader adoption and usage of cryptocurrencies.
In their letter, the Senate Finance Committee also asked about a de minimis rule and foreign reporting requirements, setting a September 8 deadline for responses. The de minimis rule refers to a capital gains tax exemption on realized gains below a certain threshold. Several crypto entities have proposed suggestions for the lawmakers to consider. These suggestions include taxing cryptocurrencies generated through staking at the point of sale, clarifying rules around wash trading, and establishing clear de minimis rules. They argue that property, unlike traditional government-issued currencies, does not enjoy a de minimis exemption, which creates friction and discourages the use of cryptocurrencies as everyday payment methods.
Industry lobbyists at the Blockchain Association also highlighted the different tax burdens imposed when treating crypto as a medium of exchange versus treating it as an investment. They emphasized that frequent transactions would create a logistical nightmare for individuals who would have to track and report each transaction. The Crypto Council for Innovation, another industry group, criticized a proposed White House excise tax on miners, suggesting that it should apply to all industry energy users to address environmental concerns. They highlighted the advantage of digital asset mining being able to easily toggle operations off and on, unlike other energy-intensive industries.
The DeFi Education Fund (DEF) advocated for rules around crypto loans, specifically fungible tokens, similar to rules governing loans of securities. Both the DEF and Coin Center argued that Section 6050I of the Infrastructure Investment and Jobs Act of 2021 may not be feasible for all parties. This provision requires individuals who receive more than $10,000 in crypto over a tax year to report personally identifying information about the senders. Given the pseudonymous nature of many crypto transactions, this requirement may not be practical. Coin Center has even sued the U.S. Treasury Department over this provision.
As the deadline for industry comment letters has passed, the next steps in the legislative process are still uncertain. In other news, the Securities and Exchange Commission (SEC) and Binance are engaged in a dispute over discovery requests. The judge overseeing the case has set October deadlines for a joint status report and an additional hearing. Additionally, Sam Bankman-Fried’s appeal of his revoked bail will be heard by a panel of appeals court judges. The bankruptcy hearing for BlockFi is also scheduled. Former Twitter head of trust and safety, Yoel Roth, penned an account of the platform’s actions on policing misinformation and the backlash he faced. Lastly, the U.S. Marine Corps lost an F-35B aircraft after the pilot ejected, and the plane wandered off on its own before crashing. The aircraft was eventually found a day later.
If you have any thoughts or questions on what I should discuss next week or any other feedback, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde. You can also join the group conversation on Telegram. See you all next week!
