House to weigh rival crypto tax plans at Tuesday hearing

The House Ways and Means Committee will hold a hearing Tuesday to consider competing proposals for changing how cryptocurrencies are taxed. Lawmakers will examine plans that range from broader transaction reporting for exchanges to an annual mark-to-market tax for large holders.

One set of proposals would expand information reporting requirements for brokers, exchanges and other intermediaries. Platforms could be required to provide more detailed 1099-style reports that record cost basis and transaction histories. Supporters say expanded reporting would make capital gains easier to calculate and simpler for the IRS to verify. Opponents say decentralized services and noncustodial wallets cannot reliably produce those records and that complex reporting rules would raise costs for smaller platforms.

Another group of proposals would change tax treatment for certain crypto holdings by taxing unrealized gains each year for traders or taxpayers above specified thresholds. Under a mark-to-market approach, assets would be treated as if sold at year-end and taxed on market value. Proponents argue this would limit long deferral of tax liabilities and align frequent trading of digital assets with other financial instruments. Critics caution that valuation challenges and price volatility could complicate compliance and force some taxpayers to sell assets to meet tax bills.

Witnesses at the hearing include Treasury and IRS officials who have pushed for clearer rules and better reporting, as well as exchange executives and tax law scholars who will describe operational limits and economic effects. Members of the committee have highlighted questions about how new rules would apply to decentralized finance platforms, cross-border transactions and assets held in self-managed wallets without a central party to report activity.

The debate involves technical and legal trade-offs. Expanding reporting targets gaps that can lead to underreported gains, but writing rules that capture noncustodial services and foreign platforms raises jurisdictional and practical issues. Adopting mark-to-market for some taxpayers would change long-standing tax treatment and could affect long-term investors and retirement accounts.

Under current IRS guidance, most virtual currencies are treated as property, so sales or exchanges typically generate capital gains or losses that taxpayers must report. Many transactions occur off centralized exchanges or through wallets that do not produce standard tax forms, creating enforcement challenges for the agency. Treasury and tax officials have proposed various reporting and classification changes in recent years, but Congress has not enacted a uniform approach.

The committee’s hearing will inform how lawmakers draft legislative language and whether competing measures are combined or move forward to markup. Any statutory change would require further committee approval and votes on the House floor before becoming law.