US Senate to Grill Coinbase Exec on Crypto Tax Rules Next Week — Regulation Incoming?

Coinbase Vice President of Tax Lawrence Zlatkin will testify at a Senate Finance Committee hearing on October 1.

Lawmakers will press for clarity on IRS treatment of crypto gains, staking, and small transactions

The U.S. Senate is set to shine the light on cryptocurrency taxation by hosting a Finance Committee hearing on October 1 called Examining the Taxation of Digital Assets. Coinbase VP of Tax Lawrence Zlatkin will be interrogated, and policy professionals and tax professionals will be part of the questions as the lawmakers consider making digital assets subject to the U.S. tax system.

Senate seeks clarity on digital asset tax treatment

It is the first session following a July White House report that urged Congress to rewrite current tax regulations on securities and commodities to include crypto. In the absence of new laws, the report recommended that the Treasury Department and IRS clarify matters like the treatment of stablecoin payments and whether staking rewards or small airdrops were to be subject to taxable events.

Other witnesses, in conjunction with Zlatkin, are Jason Somensatto of Coin Center, Andrea Kramer of ASK Kramer Law, and Annette Nellen of the American Institute of CPAs. The hearing will be livestreamed at the Dirksen Senate Office Building, enhancing its visibility.

Coinbase faces tax scrutiny amid CAMT controversy

The meeting follows as the two parties of senators express apprehension over the corporate alternative minimum tax (CAMT), which is one of the policies by the Biden administration mandating companies to pay a 15 percent tax on income on the adjusted financial statement, which includes unrealized crypto gains. Senators Cynthia Lummis and Bernie Moreno warn that such rules would compel digital asset companies to sell assets and pay taxes, which is not competitive against foreign competitors.

The testimony of Coinbase also precedes the action in Coinbase’s case. Enforceably, the Supreme Court left unchanged a decision that authorized the wide access to records of transactions by declining to restrict the authority of the IRS to demand that Coinbase provide information about its users. The IRS is in the meantime shifting the focus on staking, airdrops, and reporting divergences, which will likely be at the center of the debate next week.

On a state level, New York Assembly Bill A08966 proposes an excise tax of 0.2% on the purchase or sale of digital asset transactions, including NFTs. Once passed, it would place an additional compliance burden on exchanges and DeFi protocols.

In the case of Coinbase, the hearing will be an opportunity and a threat. The company has been a strong advocate of clear tax rules but has protested vehemently against what it describes as unprecedented tracking in IRS proposals. Senators will now decide whether the tax policy evolves with digital money or whether they will go on the offensive in enforcement.