As the U.S. government grapples with a shutdown, lawmakers are simultaneously engaged in crucial discussions regarding cryptocurrency tax policy. The Senate Finance Committee held a hearing on Wednesday, October 1, 2025, to examine the taxation of digital assets amidst growing uncertainty. This comes as the Treasury Department and the IRS are working to clarify crypto tax rules, offering some relief to crypto companies.
The government shutdown, triggered by Congress's failure to pass a funding bill, has broader implications for the economy and markets, including the crypto sector. While the shutdown doesn't directly halt crypto trading or impact existing spot Bitcoin and Ethereum ETFs, it introduces uncertainty that can trigger market volatility. Delays in data releases and regulatory reviews due to the shutdown could also unsettle investors.
A key focus of the Senate Finance Committee hearing was to address the lack of clarity in current tax regulations for digital assets. Senator Mike Crapo, the Chairman, emphasized the need for straightforward answers for various digital asset transactions, from buying coffee to donating to charity. He noted that the existing tax uncertainty makes the U.S. a less attractive place for crypto businesses and investments, hindering tax compliance. Senator Ron Wyden criticized Republicans for holding the hearing amidst the shutdown, but acknowledged the importance of addressing crypto tax issues. He highlighted the potential for a large increase in the tax gap due to the shadowy rules around crypto.
Several proposals are on the table to modernize crypto tax policy. One is a de minimis exemption for small cryptocurrency transactions. Coinbase's Vice President of Tax, Lawrence Zlatkin, suggested a tax exemption for transactions under $300 to encourage the commercial use of cryptocurrencies in payments and foster innovation within the U.S. Senator Lummis has also introduced legislation including a de minimis provision to exclude gains or losses from crypto transactions under $300 from being taxed. Another key proposal is to ensure that the lending of digital assets is not treated as a taxable event. Lummis sought to incorporate these provisions into a larger reconciliation bill, but that did not happen.
The IRS and Treasury Department are also taking steps to provide clarity. They issued interim guidance aimed at easing compliance under the Corporate Alternative Minimum Tax (CAMT). This guidance allows digital asset companies to exclude unrealized gains and losses on digital assets held as fair value assets from CAMT income. This move was welcomed by crypto advocates, including Senator Lummis, who saw it as a victory for common sense. The guidance addresses concerns that taxing paper profits on crypto was unfair and inconsistent with the treatment of traditional assets.
Furthermore, new IRS reporting rules are set to take effect in 2025. Cryptocurrency exchanges and digital asset brokers will be required to report sales transactions to the IRS using the new Form 1099-DA. Starting in 2026, this form will also include cost basis information to help the IRS determine capital gains or losses.
These developments signify a growing effort to integrate digital assets into the existing financial and regulatory framework. While the government shutdown adds a layer of complexity and uncertainty, the ongoing discussions and regulatory updates suggest a commitment to addressing the unique challenges posed by cryptocurrency taxation.
