Journalist
Hassan Shittu
Journalist
Hassan Shittu
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The U.S. Senate is preparing to wade deeper into the issue of digital asset taxation, with a high-profile hearing set for next week that will put crypto executives, such as Coinbase VP, policy advocates, and tax lawyers in the hot seat.
The Finance Committee, chaired by Senator Mike Crapo, will convene on October 1 for a session titled “Examining the Taxation of Digital Assets.”
The session will also feature Coin Center policy director Jason Somensatto, ASK Kramer Law’s Andrea Kramer, and Annette Nellen, who chairs the American Institute of CPAs’ Digital Assets Tax Task Force.
However, Coinbase Vice President of Tax Lawrence Zlatkin will be in the spotlight. Notably, the hearing will be livestreamed from the Dirksen Senate Office Building.
The backdrop is a July report from the White House’s Digital Asset Working Group that urged Congress to tailor existing tax rules for securities and commodities to cover digital assets, rather than treating them as an outlier.
Without new legislation, the report pressed the Treasury Department and IRS to clarify grey areas, such as how to tax stablecoin payments and whether small sums from staking, mining, or airdrops should trigger taxable events.
Senate to Grill Crypto Execs on Tax Rules Amid CAMT Backlash
Adding to the pressure, Senators Cynthia Lummis and Bernie Moreno recently urged the Treasury Department to address what they call an “unintended tax burden” on digital asset companies, created by a Biden-era provision in the Inflation Reduction Act.
The corporate alternative minimum tax (CAMT) imposes a 15% minimum levy on adjusted financial statement income, including unrealized gains from digital assets. Critics warn that this could force companies to pay taxes on paper profits even if they have not sold the assets.
In a letter to Treasury Secretary Scott Bessent, the senators argued that the CAMT could harm U.S. competitiveness by forcing American firms to sell tokens to cover tax liabilities, while foreign rivals face no such constraint.
They urged Treasury to use its regulatory authority to exempt unrealized crypto gains from the calculation, aligning tax policy with the reality that gains are only realized upon sale.
Senator Lummis has already been vocal about what she calls “double taxation” of miners and stakers, who pay tax when rewards are earned and again when sold. She attempted to incorporate corrective language into President Trump’s budget reconciliation bill earlier this year, but it was not included in the final draft.
The stakes are high. The Biden administration was criticized for dragging its feet on crypto regulation; however, since Trump’s return to office in January, officials have sought to accelerate policy clarity, framing it as a means to boost innovation and retain talent in the U.S.
The White House has signaled support for de minimis tax exemptions, shielding small, routine crypto transactions from liability — a proposal that will likely be discussed in next week’s hearing.
For Coinbase and other industry representatives, the session presents a rare opportunity to push back against rules they argue are stifling adoption. For lawmakers, it will test whether Washington can finally reconcile tax law with the realities of a fast-growing, increasingly mainstream asset class.
Coinbase Faces Intensifying Tax Pressure as Senate Hearing, IRS Surveillance, and State Proposals Converge
Coinbase’s testimony comes at a sensitive moment just months after the Supreme Court cleared the way for the IRS to keep probing crypto users’ data.
In June, the U.S. Supreme Court declined to hear Harper v. IRS, a case challenging the agency’s power to compel Coinbase to share user data.
The denial left intact a lower court ruling that allowed the IRS to collect records on transactions, security settings, and personal correspondence from accounts, such as that of James Harper, who argued that his Fourth Amendment rights were violated.
Coinbase initially resisted but was ultimately forced to comply with narrowed summonses.
The case reignited debate over the “third-party doctrine,” which holds that individuals forfeit their privacy rights over records held by service providers.
Coinbase’s chief legal officer, Paul Grewal, also warned that the IRS’s sweeping approach amounted to “unchecked surveillance” extending far beyond crypto. Privacy advocates and even Justice Neil Gorsuch have questioned whether decades-old precedents remain relevant in an era of digital finance.
Meanwhile, enforcement pressure is rising. CoinLedger reported a ninefold increase in IRS-related support requests from users between May and June compared with 2024, reflecting a surge in tax notices.
Experts say the agency is focusing on discrepancies in staking, airdrops, and the reporting of small transactions, the very areas lawmakers may address next week.
At the state level, New York has entered the fray with Assembly Bill A08966, proposing a 0.2% excise tax on all digital asset transactions, including NFTs.
If enacted, the levy, earmarked for school prevention programs, would mark one of the most sweeping attempts to treat crypto as a revenue stream at the state level, potentially complicating compliance for exchanges and DeFi protocols.
Coinbase has long positioned itself as a proponent of clear, workable tax rules, but it has fiercely opposed what it calls “unprecedented and unlimited tracking” in IRS proposals.
As the company faces senators in Washington, the industry will be watching closely to see whether policymakers strike a balance between tax compliance, competitiveness, and individual privacy or double down on aggressive enforcement at the expense of innovation.
