In October 2025, the Senate Finance Committee’s hearing on “Examining the Taxation of Digital Assets” highlighted some of the main tax issues related to cryptocurrency. Several issues with the current tax treatment of crypto were discussed during the Senate hearing.
Here are the top three:
1) create a de minimis exclusion,
2) clarify tax on staking rewards, and
3) change reporting requirements.
Lawrence Zlatkin, Vice President, Tax, Coinbase Global, Inc. said –
The problem is that crypto does not fit neatly into the traditional categories of the Internal Revenue Code of 1986, as amended (the “Code”). Trying to stretch old tax definitions into this
new world leaves taxpayers, regulators, and markets with answers that are incomplete at best, and counterproductive at worst. The lack of tailored rules has real consequences:
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Inconsistent Tax Treatment of Identical Transactions.
Imagine two taxpayers who each stake tokens on the same blockchain network. One uses a U.S. validator, while the other routes through an offshore pool. Because the sourcing rules are unclear, one taxpayer may be required to treat the staking rewards as U.S.-source income subject to U.S. withholding tax, while the other could treat the rewards as foreign-source income not subject to U.S. withholding tax. The underlying
economic transaction is identical, but the tax consequences diverge sharply. That inconsistency erodes confidence and increases the risk of costly disputes with the IRS.
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Everyday Consumer Burdens.
Picture an ordinary American who uses stablecoins to buy a $4 cup of coffee on the way to work. Because digital assets are treated as property, that $4 transaction triggers a taxable event that must be tracked and reported. Multiply that across thousands of small transactions, and the compliance burden quickly becomes unmanageable — discouraging mainstream adoption of efficient new payment tools. And for what? There is no gain or loss with stable coins. The payments use case contemplated in the bipartisan GENIUS Act cant scale under these rules.
Regardless, here’s a quick summary of existing reporting requirements –
- Trading between one coin to another must be reported to the IRS. The IRS has been scanning taxpayers’ information to determine if they have had any transactions with any exchanges
- Other activities that must be reported include ICOs, DeFi activity, airdrops, hard forks, mining of crypto, and staking rewards.
- Crypto scams actually may qualify for one of several different types of deductions
- You may receive a 1099-K from your exchange, even if you lost money
- Crypto gambling/wager activity has its own reporting rules
- Remember the required IRS “Form 8949” format
