Two prominent members of the United States Senate have formally urged the Department of the Treasury to address a potential tax burden on digital asset companies, arguing that the current framework risks hindering American competitiveness and innovation in the burgeoning financial technology sector.
Senators Cynthia Lummis of Wyoming and Bernie Moreno of Ohio co-signed a letter to the Treasury Secretary, calling for the repeal or modification of a tax policy that could impact unrealized gains from digital assets, including cryptocurrencies like Bitcoin. They contend that the existing approach, which could tax profits before they are actually realized through a sale, is an unintended consequence of recent legislation and accounting standards.
Understanding the Tax Concern
The issue, as outlined by the senators, stems from the intersection of two key developments: the Corporate Alternative Minimum Tax (CAMT) introduced by the Inflation Reduction Act of 2022, and recent accounting rule changes by the Financial Accounting Standards Board (FASB).
- The CAMT imposes a 15% minimum tax on the “adjusted financial income” (AFSI) of corporations with over $1 billion in revenue.
- Separately, in 2023, FASB mandated that companies must account for their digital asset holdings at “fair value,” essentially requiring them to mark the value of these assets to market prices periodically.
The senators argue that when these two rules interact, they create a situation where companies holding digital assets might face a tax liability based on increases in the market value of those assets, even if they have not sold them and therefore have not realized any actual profit. This, they state, is a “tax on unrealized gains.”
“Lack of clarity regarding the taxation of unrealized income could force companies to sell assets solely to pay taxes,” the letter stated. “This discourages holding digital assets and jeopardizes financial innovation.”
Lummis and Moreno emphasized that this challenging situation likely arose not from deliberate intent by Congress or FASB but from a conflict between differing accounting standards and tax principles.
Impact on US Leadership
According to the senators, this tax policy has several negative consequences:
- It could slow the growth of cryptocurrency and blockchain companies within the United States.
- It makes the U.S. less attractive for fintech investors compared to other global markets.
- Ultimately, it threatens the leadership position the U.S. aims to hold in the global fintech sphere.
Our edge in digital finance is at risk if U.S. companies are taxed more than foreign competitors. @berniemoreno & I urged the @USTreasury to lift an unintended tax burden on U.S. digital asset companies. To lead the world in digital assets, we need a level playing field.⬇️ pic.twitter.com/V7pwAUqRc4
— Senator Cynthia Lummis (@SenLummis) May 13, 2025
Proposed Solution
To rectify this issue, the senators have proposed that the Treasury Department utilize its existing legal authority to make adjustments to the calculation of AFSI. Specifically, they recommend excluding the unrealized income generated from digital assets valued under the new fair value standards from the AFSI calculation.
This requested action underscores ongoing efforts by some lawmakers to refine tax regulations as they apply to the rapidly evolving landscape of digital assets and blockchain technology in the United States.
Kate specializes in clear, engaging coverage of business developments and financial markets. With a knack for breaking down economic data, she makes complex topics easy to understand.