Bitcoin Advocacy Coalition Appeals for Tax Exemptions
A coalition of Bitcoin advocacy organizations is appealing to U.S. lawmakers to broaden proposed tax exemptions to include Bitcoin and significant network tokens in addition to stablecoins. They caution that confining tax relief solely to dollar-pegged tokens would fail to address the compliance difficulties encountered by millions of Americans who utilize cryptocurrency for daily transactions.
Concerns Over Current Tax Proposals
The Bitcoin Policy Institute, accompanied by groups such as Bitcoin Voter, Blocks, the Crypto Council, the Digital Chamber, MoonPay, and River, expressed this concern in a letter directed at Senate Finance Committee Chairman Michael Crapo and House Ways and Means Committee Chairman Jason Smith.
“Payment stablecoins do not function independently; they are entrenched in open blockchain networks that depend on distinct network tokens for security, consensus, and transaction processing.”
Their correspondence, sent on a recent Sunday, highlights the potential shortcomings of current tax proposals that restrict de minimis tax exemptions to only payment stablecoins compliant with the GENIUS Act—legislation that received presidential approval in July. According to the coalition, such limitations would undermine the fundamental objectives of intended tax reforms.
IRS Classification and Taxable Events
As Congress deliberates on simplifying tax reporting requirements concerning crypto transactions, it’s crucial to remember that the IRS classifies cryptocurrency as property. Consequently, even simple transactions like using Bitcoin to buy a cup of coffee result in a taxable event, necessitating complex calculations of gains or losses.
Proposed Parameters for Tax Exemptions
In their letter, the coalition advocates for treatment of GENIUS-compliant stablecoins akin to cash, devoid of transaction limits or annual restrictions. They further suggested specific parameters, such as defining eligibility for tax exemptions based on a network token’s market capitalization exceeding $25 billion, coupled with a $600 transaction limit and a $20,000 annual cap.
In the U.S., around 45 million individuals invest in cryptocurrency, predominantly Bitcoin. The letter cites data from the Federal Reserve indicating that approximately 7 million Americans engaged in payments using Bitcoin or other network tokens in 2024.
Current Landscape and Future Implications
This advocacy comes at a time when about 3,500 merchants across all 50 states accept Bitcoin, marking the U.S. as the largest nation for Bitcoin transactions. The initiative revives discussions that had stalled last July when Senator Cynthia Lummis (R-WY) attempted to include crypto tax amendments in former President Donald Trump’s reconciliation bill.
The conversation gained momentum last October when Block founder Jack Dorsey reignited interest by calling for federal tax exemptions for everyday Bitcoin use, coinciding with the launch of crypto-enabled wallets for small businesses by his payments firm. Lummis has since pledged to resubmit the proposal in future Senate sessions as a significant driver of Bitcoin adoption.
The urgency for action has intensified due to new regulations mandating digital asset sales be reported on Form 1099-DA for every transaction occurring starting January 1, 2025. The coalition warns that without thoughtful de minimis relief, the resulting discrepancies will lead to excessive audit risks and convoluted reporting processes that are not commensurate with the economic realities of the transactions discussed.
