The U.S. Senate Finance Committee recently held a hearing on crypto taxes, drawing attention to the gaps and complexities in how digital assets are treated under current tax law. The session revealed both industry concerns and government challenges in managing billions of potential transactions. Witnesses, including Coinbase’s vice president of tax, warned that the Internal Revenue Service may not be prepared for the volume of reporting coming its way.

The hearing came just one day after the Treasury Department and IRS released interim guidance on the Corporate Alternative Minimum Tax, offering temporary relief to digital asset companies. With the crypto sector continuing to expand, the discussion reflected the urgency for clearer, long-term tax policies.

IRS Capacity and Industry Concerns

Lawrence Zlatkin, Coinbase’s vice president of tax, told senators that the IRS is “probably unprepared” for the volume of crypto brokerage filings set to arrive under new reporting requirements. He stressed that while new rules are being developed, lawmakers should consider what the agency can realistically manage. According to Zlatkin, crypto’s unique structure as a democratized asset class means billions of transactions will be reported, making compliance a significant task for both companies and regulators.

Industry participants are particularly focused on issues like whether small everyday transactions should be exempt from tax reporting. Proposals such as a $300 de minimis threshold and delays in taxing staking rewards until they are sold are still under discussion in Congress. Without decisions on these questions, businesses and investors remain uncertain about their obligations.

Lawmakers Call for Clarity

Senator Mike Crapo, who chaired the hearing, summarized the situation by pointing out that the current tax code does not provide clear answers for many digital asset transactions. Whether someone is making a purchase, donating, investing, or staking, the rules often remain ambiguous. This lack of clarity leaves taxpayers with unresolved questions and complicates compliance efforts.

Some senators used the hearing to express concerns about tax avoidance in the crypto sector. Senator Elizabeth Warren criticized lobbying efforts that, in her view, aim to secure favorable tax treatment for wealthy crypto holders. Others, like Senator Ron Wyden, acknowledged the need for updated tax guidance but noted that Congress has a long list of issues competing for attention.

Relief on Corporate Minimum Tax

Alongside the hearing, the Treasury Department and IRS issued interim guidance on the Corporate Alternative Minimum Tax (CAMT), a 15 percent minimum tax introduced in the 2022 Inflation Reduction Act. The guidance clarified that companies can exclude unrealized gains and losses on digital assets held at fair value from adjusted financial statement income.

This change has been welcomed by firms with large crypto holdings, such as Michael Saylor’s company Strategy, which reported more than 640,000 Bitcoin with billions in unrealized gains. Without the relief, these paper gains could have significantly increased tax liabilities. While industry groups called the adjustment a positive step, it remains only temporary until permanent regulations are issued.

Related read: Strategy 640,031 BTC Total After $22M Bitcoin Purchase

Ongoing Uncertainty

The Senate hearing highlighted the broader challenge of aligning tax policy with a rapidly evolving digital asset economy. Witnesses including Coinbase’s Zlatkin and Jason Somensatto from Coin Center argued for rules that recognize the differences between digital assets and traditional securities or commodities.

Meanwhile, the IRS itself faces staffing shortages and leadership changes, which could further complicate its ability to manage new reporting demands. The agency recently created a dedicated crypto office, but its future remains uncertain following key departures.

Also read: Tether Strengthens Bitcoin Treasury with $1 Billion Purchase

Looking Ahead

Lawmakers and regulators are under pressure to provide clarity on how crypto transactions will be taxed in the years ahead. While interim guidance on corporate tax brings some relief, most of the difficult questions remain unresolved. Whether Congress moves forward with proposals like de minimis exemptions or revised staking rules will play a key role in shaping how the industry develops.

For now, the U.S. Senate hearing on crypto taxes underscores the complexity of adapting traditional tax frameworks to an asset class that continues to grow and diversify. Until comprehensive policies are put in place, both industry and regulators will face ongoing challenges in managing compliance and reporting.