On Wednesday, during a Senate Committee on Finance hearing, US lawmakers discussed cryptocurrency tax policies, including possible exemptions for transactions below a specific threshold and the classification of income from staking services.
Lawrence Zlatkin, vice president of tax at crypto exchange Coinbase, urged the Senate committee to consider a de minimis tax exemption for cryptocurrency transactions under $300 to promote commercial use in payments and ensure innovation remains in the US. Zlatkin stated:
“The guiding principle is simple parity with traditional finance. The same tax rules should apply to the same economic activity, whether it involves commodities, stocks, or tokens on a blockchain. Currently, that parity is lacking. The absence of tailored rules has significant repercussions.”
Lawmakers are also considering ways to close the annual tax gap of approximately $700 billion by enforcing stricter reporting requirements for cryptocurrency transactions, minimizing tax exemptions, and possibly categorizing revenue from staking services as earned income that is subject to the tiered income tax system.
Tax policy remains a critical issue for cryptocurrency users, industry leaders, and firms that face uncertainty regarding the implications of their activities and the potential for penalties from the Internal Revenue Service (IRS) for engaging with the digital economy.
Related: US Senate Finance Committee to discuss crypto tax matters next week
Elizabeth Warren speaks out, asserting that looser tax requirements benefit money launderers
“Crypto holders aren’t paying at least $50 billion per year in taxes that they owe,” stated Massachusetts Senator Elizabeth Warren during the hearing.
Warren contended that creating special tax exemptions for cryptocurrencies would disadvantage other asset classes, as investors would likely shift to crypto to capitalize on tax savings.
“The Joint Committee on Taxation estimates that this proposal alone would yield a $5.8 billion tax increase for crypto investors,” Warren added.
Warren connected special tax exemptions for crypto to money laundering, arguing that such exemptions would facilitate evasion of US sanctions and oversight by the Financial Crimes Enforcement Network (FinCEN).
She concluded by asserting that no special tax exemptions should be granted for digital assets, and all profits from crypto transactions should be taxed according to the current policy framework governing securities and commodities investing.
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