During the July 16 House Ways and Means Oversight Subcommittee hearing on "Making America the Crypto Capital of the World: Ensuring Digital Asset Policy Built for the 21st Century," industry representatives provided a wish list of issues that should be addressed regarding the taxation of cryptocurrency, including a de minimis rule to exempt digital asset transactions under a certain threshold. Other issues addressed at the hearing included staking — described as the activity of validating and recording transactions, which involves pledging native digital assets to the protocol — international competition, and barriers to innovation.

Chairman Dave Schweikert (R-AZ) said of his policy goal for cryptocurrency, "We're the tax-writing committee. We're going to try to figure out now as the committees with the regulatory oversight — Financial Services, the Senate companion — make the rules, we now have to figure out how it fits into the tax structure." Ranking Member Terri Sewell (D-AL) argued for tougher rules. "As digital assets take a larger role on the world stage, it is important that we protect consumers, we remove bad actors and that we ensure fair tax treatment for all. We must work to strengthen, rather than weaken the guardrails in place to protect Americans," she said.

The hearing follows the June 30 introduction by Senator Cynthia Lummis (R-WY) of digital asset tax legislation (S. 2207) that includes a $300 de minimis rule, provides that digital asset lending agreements are generally not taxable events, revises the wash sale rules as they pertain to digital assets, provides that mining and staking income is not recognized until sale/disposition of produced assets, and says charitable contributions do not require an appraisal.

While there is no current House counterpart to the Lummis bill, multiple members, including Reps. Max Miller (R-OH) and Steven Horsford (D-NV), expressed an interest in introducing legislation on cryptocurrency tax issues. Miller said his forthcoming draft legislation seeks to:

• Ease reporting burdens for de minimis transactions
• Modernize wash sale rules and mark to market elections
• Provide clear guidance on staking, mining, and income recognition
• Improve the treatment of charitable contributions, lending, and qualified retirement plans

Additional information is available in the attached WCEY Alert.