US Senate Financial Committee Asks Crypto Industry How to Tax it

• US Senate Financial Committee Chair Ron Wyden asked the crypto community how to tax crypto
• In an open letter, Wyder said that his Committee is looking into solutions for complex taxation issues.
• The “Internal Revenue Code of 1986 provides “no straightforward classification for digital assets,” he said.
• The Financial Committee asked a number of questions, which were grouped into nine categories

The crypto market explosion of 2021 saw many investors make tremendous gains but not pay any taxes on them due to the absence of regulations. Taxing the digital asset industry has been a challenge for agencies around the world because of its ability to hide the transaction details of a user. Interestingly, the US Senate Financial Committee has asked the crypto community via an open letter how to tax the industry.

In an open letter dated July 11, US Senate Financial Committee Chair Ron Wyden and ranking member Mike Crapo asked for the input of the digital asset community on how to tax the industry. The lawmakers of the country have been looking into the taxation of the industry for a long time and are looking for solutions to complex taxation issues

The US Senate Financial Committee noted that the “Internal Revenue Code of 1986 provides “no straightforward classification for digital assets” and, as a result, asked a number of questions that were grouped into nine categories

“In recent months, the Committee on Finance initiated a bipartisan effort to identify key questions that lie at the intersection of digital assets and tax law,” said the open letter.

The letter covers issues like trading safe harbor to encourage foreign investment, digital asset loans, wash sales, constructive sales (which are closely related to short-selling), income from staking and mining, “nonfunctional currency,” reporting by foreign firms, and valuation and substantiation on an exchange.

The questions in the open letter regularly mention specific sections of the tax code. It is crucial to note that the Internal Revenue Service (IRS) has made tremendous efforts to counter criminal activities.

As per a May statement, the agency claims to have seized an estimated $10 billion worth of cryptocurrency since it began investigating investors As earlier reported by Bitnation, crypto exchange Kraken was ordered by a court to provide customer data to the IRS. The data includes blockchain addresses and transaction hashes for customers who traded more than $20,000 in a year, along with details like names, birthdates, taxpayer ID numbers, addresses, phone numbers, and email addresses.