US Senate Finance Committee asks digital asset community how to tax it in open letter

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Get out your calculators. The Senate has asked the crypto community for advice.

The Internal Revenue Code of 1986 provides “no straightforward classification for digital assets,” the senators said. They asked a large number of questions grouped into nine subject areas, explaining:

“In recent months, the Committee on Finance initiated a bipartisan effort to identify key questions that lie at the intersection of digital assets and tax law.” The letter covered issues relating to fair value accounting, the trading safe harbor to encourage foreign investment, digital asset loans, wash sales, constructive sales , income from staking and mining, “nonfunctional currency,” reporting by foreign firms, and valuation and substantiation on an exchange. The questions make frequent reference to specific sections of the tax code.

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The IRS is taking more steps to tax crypto income. For example, it requested user data on transactions over $20,000 from crypto exchange Kraken in 2021. The District Court for the Northern District of California ordered Kraken to comply on June 30.

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