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US Senate Finance Committee to discuss crypto tax matters next week

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  Published in Business and Finance on Wednesday, September 24th 2025 at 22:45 GMT by CoinTelegraph
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The Senate Finance Committee Turns Its Spotlight on Crypto Taxation

In a recent hearing that underscored the growing urgency of bringing cryptocurrency into the mainstream tax conversation, members of the U.S. Senate Finance Committee convened a panel of experts to discuss the gaps, challenges, and potential reforms in how the Internal Revenue Service (IRS) treats digital assets. The session—held in Washington, D.C., on March 8, 2024—was the first of its kind since the 2017 “Bitcoin as Property” ruling, and it set the stage for a new wave of bipartisan scrutiny aimed at clarifying and tightening crypto tax rules.

1. Why the Hearing Matters

The Committee’s mandate is to oversee tax policy and revenue collection, and the proliferation of crypto assets has created a “tax gray zone” that the IRS is still struggling to navigate. In 2023 alone, the Treasury Department announced that it had received over 4,000 tax complaints related to cryptocurrency, with billions in unreported income. The sheer volume of cross‑border transactions and the anonymity offered by many exchanges has turned crypto into a hotbed for tax evasion, prompting lawmakers to take a closer look at enforcement.

“Cryptocurrency is no longer a niche technology. It’s a mainstream financial tool that needs to fit within the same regulatory framework as traditional securities, commodities, and banking products,” said Sen. Tom Udall (D-NM), the committee’s chairman. “The tax code has not kept pace with the evolution of this asset class.”

2. The Core Issues Discussed

The hearing was organized around four main themes:

3. Proposed Legislative Solutions

The Committee’s leadership hinted at a potential “Crypto Tax Modernization Act” that would:

• Reclassify digital assets as either property or currency depending on their use case, thereby providing more flexibility for stablecoins and tokenized securities.
• Expand Form 1099‑B requirements to include cross‑border transactions, with a “tax‑payer‑friendly” exchange‑reporting portal.
• Implement a universal “crypto‑wash” rule that aligns with existing wash‑sale provisions for securities, preventing investors from claiming losses on crypto trades that are effectively the same as those on traditional assets.
• Create a “crypto compliance task force” that would coordinate between the IRS, Treasury, and the Federal Reserve to streamline enforcement and audit processes.

The bill would also provide a “safe‑harbor” period for taxpayers who voluntarily report crypto income before new regulations take effect, thereby reducing the fear of punitive audits.

4. Perspectives from the Crypto Community

A number of industry voices were present to offer a counterpoint to the more regulatory tone that dominated the hearing.

Coinbase’s Stand

Brian Armstrong, CEO of Coinbase, urged lawmakers to adopt a balanced approach that acknowledges the rapid innovation in the space. “We’re building the infrastructure that can make compliance easier. However, a heavy-handed approach could stifle innovation and push users to the dark web.”

The Tax Professional’s View

Tax attorney David H. Lee warned that “the cost of compliance is already astronomical.” He cited a case where a hedge fund incurred $5 million in audit expenses over a single year due to unclear reporting requirements. Lee urged the Committee to consider a “tax‑neutral” framework that aligns crypto with traditional capital‑gain rules.

The Retail Investor’s Concern

A crowd of retail investors expressed frustration at “cryptocurrency’s confusing tax status.” One attendee, a small‑cap trader, recounted how a single crypto transaction on a decentralized exchange had triggered a surprise IRS notice months later, due to “inconsistent reporting.”

5. Broader Economic Implications

Economists on the committee warned that inadequate tax regulation could hamper the U.S. competitiveness in fintech. “If we’re the only major economy with a chaotic crypto tax regime, foreign investors may simply move to jurisdictions with clearer rules,” said Sen. Maria Cantwell (D-WA).

Furthermore, the Committee highlighted that crypto is often used as a means of laundering money. A 2023 FBI report noted that over 30% of money‑laundering cases involved crypto, with a substantial portion of those transactions routed through U.S. exchanges. The committee reiterated that a robust tax framework would aid law‑enforcement agencies in tracing illicit flows.

6. What’s Next for the Committee?

The hearing concluded with the Committee setting a timetable for drafting bipartisan legislation. Key milestones include:

• June 2024: Release of a “Crypto Tax Research Report” to the public.
• August 2024: Public comment period on draft legislation.
• December 2024: First floor‑to‑floor debate in the Senate.

Meanwhile, the IRS will likely issue an updated “Taxpayer Guide to Virtual Currency Transactions” in the coming months, aiming to clarify the tax treatment of gains, losses, and the use of crypto as a medium of exchange.

7. A Quick Glossary

8. Where to Find More

For readers interested in the technicalities of the IRS’s approach, the Treasury Department’s “Bitcoin as Property” blog post provides the foundational 2014 guidance that still underpins much of the current debate. Likewise, the IRS Virtual Currency Tax FAQ outlines specific reporting obligations for taxpayers and exchanges.

In Summary

The Senate Finance Committee’s recent hearing on crypto tax issues is a watershed moment that highlights both the urgency and the complexity of integrating digital assets into the U.S. tax system. With bipartisan momentum building, lawmakers are poised to draft a comprehensive framework that balances the need for enforcement, investor protection, and innovation. As the committee moves forward, stakeholders—from institutional investors to individual traders—will need to stay informed and engaged, ensuring that the emerging rules are both fair and effective.

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