America must set tax rules of the road for cryptocurrencies

By U.S. Sen. Mike Crapo
R-Idaho

In recent years, digital assets, such as cryptocurrencies, have become an important part of our global financial system. Because of its jurisdiction over federal tax policy, the U.S. Senate Finance Committee I lead as Chairman is discussing how our tax code can provide a clear framework to ensure American leadership in this innovative industry.

Over two years ago, the Committee laid a strong, bipartisan foundation for this effort when Ranking Member Ron Wyden (D-Oregon) and I released a public request for information on how Congress could address the tax challenges and opportunities presented by digital assets. The robust input we received from stakeholders showed significant uncertainty exists, and Congress should update our tax code to provide clear and durable rules of the road.

Since receiving that input, the use and value of digital assets has continued to grow rapidly, and new and existing questions persist: What tax policy changes are needed to stop digital asset innovation from moving from the U.S. to more favorable jurisdictions in other countries? How can we ensure taxpayer rights are protected? How can Congress minimize the burden of reporting requirements on taxpayers and businesses? Perhaps the biggest question: What are the risks if Congress fails to act on this issue?

Congress made progress this summer when we passed and the President signed into law the GENIUS Act, an important step that established a first-of-its-kind framework for payment stablecoins. Our tax code, however, still does not provide straightforward answers for many digital asset transactions. Without clear tax rules, taxpayers in Idaho and across our country are left with many unanswered questions. Individuals, businesses and our country’s finances bear the burden.

Lingering tax uncertainty makes the U.S. a less attractive place to do business and invest. It also hurts tax compliance. The U.S. must not fall behind in this rapidly growing market.

Recognizing these challenges, the Trump Administration has rightly prioritized the examination of the current tax treatment of digital assets. During his first week in office, President Trump issued an Executive Order recognizing the crucial role the digital asset industry plays in U.S. innovation, economic development and international leadership. That Executive Order also established a President’s Working Group on Digital Assets Markets, which published a report titled, “Strengthening American Leadership in Digital Financial Technology.” The report includes tax legislative proposals that will continue to inform our work.

But the digital asset industry should not have to rely solely on support from the executive branch. At a Finance Committee hearing in October, I had an opportunity to raise a question about the need for federal tax law to provide clarity versus reliance on guidance from the Internal Revenue Service. Lawrence Zlatkin, Vice President of Tax at Coinbase Global, Inc., framed this need succinctly when he said:

The only way to create a durable foundation for digital assets is to clarify aspects of the law that are unclear and put that in the law itself.

As Congress further discusses these novel and complex topics, the importance of getting this tax structure right becomes even more apparent. Simply put, our tax code must adapt its treatment to new and diverse cryptocurrency products and functions. I look forward to the ongoing work to advance legislative solutions that benefit taxpayers and our economy alike.

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