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Senate Debates Tax Exemptions for Small #Crypto Transactions

U.S. lawmakers debated crypto tax policy at Wednesday's Senate Committee on Finance hearing, focusing on possible tax exemptions for #cryptocurrency transactions below certain thresholds. The hearing addressed how income from staking services should be classified and whether special exemptions would encourage everyday use of digital assets.

Lawrence Zlatkin, vice president of tax at crypto exchange #Coinbase, urged the Senate committee to consider a de minimis tax exemption for cryptocurrency transactions under $300. He argued this would encourage commercial use in payments and ensure innovation occurs inside the U.S.

Zlatkin stated that the guiding principle is simple parity with traditional finance, where the same tax rules should apply to the same economic activity. He noted that right now, that parity does not exist and the lack of tailored rules has real consequences.

Lawmakers also grappled with how to close the annual tax gap of about $700 billion through enforcing tighter reporting requirements for cryptocurrency transactions. They discussed potentially classifying revenue from #staking services as earned income subject to taxation under the tiered income tax system.

Massachusetts Senator #ElizabethWarren opposed special tax exemptions, stating that crypto holders aren't paying at least $50 billion per year in taxes that they owe. Warren argued that by carving out special tax exemptions for cryptocurrencies, other asset classes would suffer as investors abandoned them to take advantage of tax savings in crypto.

The Joint Committee on Taxation estimates that a de minimis exemption proposal would be a $5.8 billion tax boost for crypto investors. Senator Warren drew a link between special tax exemptions for crypto and money laundering, arguing that exemptions would provide cover to evade U.S. sanctions and surveillance by the Financial Crimes Enforcement Network.