Coin Center submits comments to U.S. Senate on cryptocurrency taxation

The crypto-industry advocacy group Coin Center submitted proposals on the taxation of digital assets in response to a request from the U.S. Senate Finance Committee.

In the letter, representatives of the organization cited the Virtual Currency Tax Fairness Act. Under the bill, IRS would set a tax-free minimum for crypto transactions. Such a step could promote the use of digital assets as a means of payment, equating their operations with the purchase/sale of foreign currencies.

«Forcing ordinary people to collect data about other users and report it to the government without a warrant from the agency is unconstitutional under the Fourth Amendment», — the statement said.

Coin Center urged lawmakers to consider exempting third-party reporting requirements for digital assets. Under the law, cryptocurrency holders and users in states could be required to provide “incomplete or non-existent” information about the senders of digital assets, which would be a burden on citizens and raise privacy concerns.

«If trading Bitcoin leads to traders’ data no longer being confidential, it will have serious consequences for the entire cryptocurrency ecosystem», — the experts stressed.

The organization also urged revisiting the broker definition for tax purposes to exclude miners and node operators from this category, and to curb the agency’s power to pursue lawsuits against potential evaders.

Coin Center cited the 2016 case when the IRS issued Coinbase a subpoena with notice of an “unknown person,” enabling the agency to obtain a large volume of data from the platform’s customers who may not have been involved in any violations.

Experts also recommended that the IRS clarify the taxation of block rewards, airdrops and hard forks, and not require an appraiser for donations of digital assets.

The IRS proposed to include in the calculation of taxable income the rewards earned from staking coins in networks Proof-of-Stake.

In March 2023, U.S. President Joe Biden proposed to raise taxes on crypto investors by $24 billion.

Earlier, Coin Center filed a lawsuit against the U.S. Department of the Treasury and its arm OFAC over sanctions against Tornado Cash.