Senate Finance put crypto’s unresolved tax rules on the record

Congress examines the tax gap

On October 1, 2025, the U.S. Senate Committee on Finance held a full committee hearing titled “Examining the Taxation of Digital Assets.” The panel brought together witnesses from Coin Center, tax law, Coinbase and the American Institute of Certified Public Accountants to examine where existing federal tax rules did—and did not—fit cryptocurrency transactions.

The hearing did not enact legislation, change Internal Revenue Service guidance or create an exemption for any digital asset. Its significance was institutional: the Senate’s tax-writing committee placed a broad set of crypto-specific questions into a formal congressional record while lawmakers were separately developing rules for stablecoins and digital-asset market structure.

Committee Chairman Mike Crapo argued that taxpayers lacked straightforward answers for activities including payments, charitable donations, investing, lending, mining and staking. Ranking-member and other Democratic interventions emphasized a different risk: that loosely designed exemptions could give crypto investors preferential treatment or reduce federal revenue. Those positions showed that agreement about uncertainty did not amount to agreement about how Congress should resolve it.

What existing law required

A Joint Committee on Taxation report prepared for the hearing described the event-day legal baseline. Under IRS Notice 2014-21, convertible virtual currency was generally treated as property rather than currency for federal income-tax purposes. As a result, disposing of digital assets—including through a purchase—could generate a reportable gain or loss based on the difference between value at disposition and the taxpayer’s basis.

The report also identified important asymmetries. Digital assets were not expressly covered by the wash-sale rule in Internal Revenue Code section 1091, which generally defers certain losses when substantially identical stock or securities are reacquired within a 61-day window beginning 30 days before a sale. Nor did a de minimis exclusion eliminate gains from small personal digital-asset transactions. The Joint Committee staff stated that gain, but not a personal loss, could be recognized when an individual used digital assets outside a trade, business or income-producing activity.

Staking raised a separate timing question. The report recorded the IRS position in Revenue Ruling 2023-14: a cash-method taxpayer generally included the fair-market value of staking rewards in gross income when the taxpayer obtained dominion and control and could sell, exchange or otherwise dispose of them. It also noted that IRS guidance had not explicitly settled every timing and sourcing question for mining and staking income.

Competing proposals, not settled policy

Witnesses proposed different ways to close those gaps. Coin Center advocated a de minimis exemption for low-value personal transactions and taxation of newly created block rewards upon disposition rather than creation. Coinbase tax executive Lawrence Zlatkin supported broader changes covering digital-asset lending, staking, mark-to-market elections, wash and constructive sales, small transactions and wallet-level cost-basis tracking. He presented those recommendations as a package and argued against using a crypto wash-sale extension merely to finance unrelated legislation.

AICPA representative Annette Nellen recommended adapting existing tax-code structures with carefully limited definitions. Her written testimony supported mark-to-market treatment for qualifying dealers and an election for qualifying traders, a safe harbor for certain foreign investors, clearer treatment of digital-asset loans, and tailored rules for wash sales, staking, mining and charitable contributions. The testimony cautioned that a broad statutory definition could sweep in illiquid or nonfungible assets that did not resemble exchange-traded securities or commodities.

What October 1 did not decide

The October 1 hearing exposed a practical conflict between easier compliance and protection of the tax base. A small-transaction exemption might reduce recordkeeping for payments and blockchain fees, but its scope, thresholds and anti-abuse protections remained disputed. Extending securities-style rules could improve parity in some transactions while producing difficult questions about which tokens or derivatives were substantially identical.

No committee vote or legislative text emerged from the hearing itself. As of October 1, 2025, the verified development was therefore scrutiny rather than reform: senators had developed a detailed record of the issues, but taxpayers still operated under then-existing statutes, regulations and IRS guidance.