Preview of the Cryptocurrency Tax Hearing: Can the Final Battle of U.S. Regulation Bring a "Definitive Bull Market"?

Next Wednesday, October 1 (UTC+8), the Dirksen Senate Office Building in Washington will become the focal point of the global crypto world. A meticulously orchestrated legislative drama will reach its final act here—the U.S. Senate Finance Committee will hold a crucial hearing titled “Examining Digital Asset Tax Policy.”

This is not just another empty policy discussion. At this moment in time, it is more like a decisive battle. With the House of Representatives having historically passed the market structure and stablecoin bills, tax policy has become the last and most critical piece of the puzzle in building a comprehensive regulatory framework for the $2.5 trillion global digital asset industry in the U.S. The outcome of this hearing will not only clarify the tax gray areas for 50 million American crypto investors, but will also determine the future position of the U.S. in the global digital economy race, charting new courses for global capital flows.

The Final Piece: The Formation of a Political Consensus

This hearing, chaired by Senate Finance Committee Chairman Mike Crapo, did not come out of nowhere. It is built on a series of solid legislative and political foundations, marking a shift in the U.S. Congress’s attitude toward cryptocurrency from exploratory scrutiny to decisive legislation.

The direct prelude was the July 2025 hearing by the House Ways and Means Committee’s Oversight Subcommittee titled “Making America the Crypto Capital of the World.” That hearing set the tone on Capitol Hill: providing a clear legal framework for the crypto industry is an urgent task to maintain America’s technological and financial leadership. Subsequently, the House historically passed two milestone bills: the “Guidance and National Innovation in U.S. Stablecoins Act” (GENIUS Act), which established a federal regulatory framework for stablecoins, and the “Digital Asset Market Clarity Act” (CLARITY Act), which aims to delineate the regulatory authority of the SEC and CFTC over digital assets.

Tax policy is the last missing and most crucial piece of this grand regulatory puzzle.

Chairman Crapo’s long-standing focus on this issue gives this hearing even deeper significance. As early as 2018 and 2020, he chaired hearings on cryptocurrency. Notably, in 2023, he and Democratic Senator Ron Wyden jointly issued an open letter soliciting detailed industry opinions on digital asset tax policy, with questions that almost entirely cover the core technical challenges to be discussed at this hearing. This series of actions demonstrates Chairman Crapo’s commitment to creating a lasting and stable legal environment for this emerging industry through bipartisan cooperation.

Therefore, this hearing in Room 215 has already transcended technical debate. It reflects a fundamental shift in the mindset of U.S. lawmakers—from “whether” to regulate cryptocurrency, to “how” to regulate it effectively and competitively. It is more like a public legislative drafting session, with the ultimate goal of producing a concrete legislative proposal, marking the conscious end of the “era of ambiguity” in U.S. crypto regulation.

Washington’s Dilemma: Using the Sword of the Previous Dynasty to Threaten the Officials of the Present?

However, despite the formation of a political consensus, to turn intentions into feasible law, lawmakers must confront a fundamental challenge: how to use a tax code designed for the analog world—a code from the “previous dynasty”—to regulate a digitally native new species?

This is the core dilemma of this hearing, concentrated in two “soul-searching” questions that have long troubled the entire industry.

The first is the fundamental disagreement over “creation as income” versus “taxation only upon sale.” Take staking as an example: the IRS’s current vague guidance tends to treat newly generated tokens as ordinary income for tax purposes at the moment “control is obtained.” The industry’s complaint is vivid: “It’s like requiring a baker to pay taxes as soon as the bread comes out of the oven, rather than after it’s sold.”

The second stems from the overly broad and unsettling “broker” provision in the Infrastructure Investment and Jobs Act. In theory, miners, software developers, and even DeFi protocol participants could be classified as “brokers,” forced to undertake user information reporting obligations that are technically impossible for them to fulfill. This is no longer regulation, but a “toll booth” on the road to innovation.

A Four-Way Game: Who Will Define the Future at the Hearing?

Jason Somensatto | Advocate of Principles

As Policy Director at Coin Center, a well-known nonprofit research and advocacy organization in Washington, Jason Somensatto represents a policy perspective in the crypto world centered on principles and rights. His career spans regulatory agencies (having worked at the CFTC) and industry analytics firms (Chainalysis), giving his views both regulatory feasibility and industry insight.

Coin Center’s core argument is not to seek tax privileges for cryptocurrency, but to demand that its tax treatment be consistent with similar economic activities. They repeatedly emphasize the unique nature of crypto assets as “consumable commodity assets”—they are assets like gold, yet as easily traded and divisible as the dollar. Based on this, they strongly advocate for clarification of key tax issues, especially the timing of taxation for block rewards (including mining and staking rewards).

Somensatto and Coin Center believe that such rewards are newly created property and should be taxed upon disposal (i.e., sale or exchange), not upon receipt. This view was vividly illustrated at the House hearing as “farmers should not be taxed when they harvest crops, but when they sell them,” a metaphor that sharply reveals the irrationality of treating unrealized gains as taxable income.

Andrea S. Kramer | Cartographer of the Legal Maze

Andrea S. Kramer is a recognized thought leader in the field of virtual currency law, known for her deep analysis of how digital assets fit (or do not fit) into existing legal categories—such as securities, currency, or commodities. Her presence highlights a core issue: the legal classification of digital assets is the cornerstone of all tax treatment.

Currently, the IRS broadly classifies cryptocurrency as “property,” but this definition is too crude to address the industry’s diversity and complexity. Kramer’s work delves into the nuances that determine whether traditional financial rules—such as the “Wash Sale Rule”—should apply to digital assets. At present, since cryptocurrencies are not considered “securities,” the wash sale rule does not apply, providing traders with tax planning opportunities not available in traditional markets.

Globally, countries differ in their legal classification of digital assets, with some focusing on their property attributes and others on their payment functions, making it a complex and crucial task to develop a classification framework for the U.S. that aligns with both international practices and domestic feasibility. Kramer’s testimony will provide a key legal perspective in this debate over definitions.

Lawrence Zlatkin | Commander on the Compliance Frontline

As Vice President of Tax at Coinbase, the leading publicly listed crypto exchange in the U.S., Lawrence Zlatkin brings a vital industry practice perspective. Coinbase must implement these tax rules for millions of users, so its views directly reflect the practical feasibility of policy. Zlatkin also plays an important role in global tax policy, having worked with the OECD on its “Crypto-Asset Reporting Framework” (CARF), giving him deep insight into global compliance trends. Coinbase’s position highlights the enormous operational challenges of the proposed regulations. Zlatkin has consistently criticized the overly broad “broker” definition in the Infrastructure Investment and Jobs Act and the new 1099-DA form reporting requirements. In an open letter, he pointed out that these rules would impose “unprecedented, unconstrained, and unlimited surveillance” on Americans’ daily lives and would flood the IRS with “useless data” from reporting countless trivial transactions. He advocates for rules that are operationally feasible, protect user privacy, and do not put the crypto industry at an unfair disadvantage compared to traditional finance.

Annette Nellen | Spokesperson for the Practitioners

Annette Nellen is Chair of the Digital Assets Tax Task Force at the American Institute of Certified Public Accountants (AICPA), as well as a respected scholar and tax policy expert. She represents the thousands of CPAs who must apply these complex rules in practice. The AICPA has submitted numerous comment letters to the IRS and Congress in recent years, providing a detailed technical roadmap for solving crypto tax challenges. Their recommendations always focus on practicality and operability, with core demands including: clear definitions for key terms such as “digital asset” and “broker”; de minimis exemptions for small personal transactions; explicit guidance on the classification of NFTs (especially whether they are “collectibles”); and clarification of the timing for recognizing staking and mining income. The AICPA’s ultimate goal is to establish a tax system that is manageable for taxpayers, accounting professionals, and even the government itself.

The selection of these four witnesses clearly reveals the committee’s strategic intent. The committee did not choose extreme or purely ideological representatives, but instead selected four top technical experts representing the core functions of the ecosystem—policy, law, operations, and accounting. This hearing is essentially a collaborative problem-solving exercise. The committee is not seeking a fight, but a durable solution that can withstand the test of time and garner broad support.

Global Competition: While America Debates, the World Acts

While Washington continues to wrangle over definitions and rules, the global flow of capital and talent has already begun. Other major economies are using more attractive policies to compete for the “new oil” of the digital economy era—innovative enterprises and high-net-worth investors.

This table clearly reveals the severe challenge facing the U.S. A long-term American bitcoin investor, after holding assets for more than a year and selling, must pay up to 20% capital gains tax; if he were in Germany, the tax would be zero. This difference is enough to make large amounts of capital “vote with their feet,” flowing to Frankfurt instead of New York.

Japan’s case is a profound warning: its harsh tax policies have led to a serious lag in its domestic crypto innovation ecosystem. U.S. lawmakers must answer one question: do they want America to become the next Germany, or the next Japan?

Conclusion: A Choice at the Crossroads

The October 1 (UTC+8) hearing is unlikely to produce a perfect bill overnight. But it is undoubtedly the “starting gun” for U.S. crypto regulation to move from chaos to clarity. The consensus forged at the hearing is highly likely to be integrated into the Senate version of the market structure bill, or directly prompt the IRS to issue long-overdue comprehensive guidance.

For the crypto industry, the worst outcome is not harsh regulation, but ongoing uncertainty. From this perspective, any clear action is better than endless waiting. However, the details of clarity will determine everything.

The U.S. stands at a historic crossroads. It can choose to establish a clear, fair, and globally competitive tax framework, seamlessly integrating digital assets into its powerful capital markets, thereby attracting and retaining top innovation for decades to come; or, it can choose a path paved with bureaucracy and outdated thinking, with complex and punitive rules that hand over this vibrant industry to more agile and visionary competitors.

The whole world is waiting for Washington’s answer. And this answer will largely define the direction of global capital flows and the technological landscape of the 21st century.