The Blockchain Association is calling for comprehensive reform of cryptocurrency taxation rules, arguing that current Internal Revenue Service guidelines fail to account for how digital assets function in modern blockchain ecosystems. The industry group’s recent policy proposals come as federal tax authorities expand reporting requirements and step up enforcement across the crypto sector, intensifying debate over whether existing frameworks are adequate for this rapidly evolving technology.
According to the trade association, the current property-based tax treatment was designed for traditional assets and creates excessive compliance burdens for blockchain users and businesses. The proposals do not seek to eliminate crypto taxation but rather to modernize when and how tax obligations are triggered during routine blockchain activity.
Current IRS Framework for Crypto Taxation
Under existing IRS guidance first formalized in 2014, cryptocurrency is classified as property rather than currency. This classification means that nearly every transaction involving digital assets can create a taxable event, from simple trades to payments and swaps.
The current system requires users to report capital gains or losses whenever crypto is sold, traded, or spent. Additionally, crypto-to-crypto exchanges are treated as taxable disposals, while mining and staking rewards count as ordinary income at the moment of receipt.
Taxpayers must track cost basis and holding periods for each individual transaction, creating significant recordkeeping challenges. Meanwhile, recent regulations have expanded reporting obligations for exchanges and brokers, requiring detailed disclosures to both users and tax authorities.
Industry Proposals for Digital Asset Tax Reform
The Blockchain Association’s policy paper focuses on adapting tax treatment to reflect how blockchain technology actually operates. Among the key recommendations are provisions to defer taxation on routine onchain activity until assets are converted to traditional currency.
The proposals also call for clearer exemptions for protocol-level operations such as staking and network validation. Furthermore, industry groups are advocating for simplified cost-basis tracking methods designed to accommodate high-frequency transactions that occur onchain.
Supporters argue these changes would align tax policy more closely with how digital assets function as payment infrastructure and decentralized finance tools. According to the advocacy groups, the goal is creating clarity and consistency as blockchain use expands beyond speculation into enterprise applications.
Rising Urgency Behind the Tax Debate
The timing of these proposals coincides with heightened IRS enforcement activity in the crypto space. However, Congress has yet to pass comprehensive digital asset legislation, leaving many regulatory questions unresolved.
Industry representatives contend that outdated tax rules risk pushing innovation to more favorable jurisdictions overseas. Without modernized frameworks, they argue, US-based developers and users may be discouraged from participating in blockchain networks altogether.
In contrast, the IRS has maintained that existing tax principles provide adequate coverage for emerging technologies. The agency continues to apply traditional property tax concepts to cryptocurrency transactions despite industry objections.
Realistic Expectations for Crypto Tax Changes
Even if policymakers adopt some of the industry’s recommendations, fundamental tax obligations on digital assets would remain in place. Capital gains reporting, income taxation, and enforcement mechanisms would continue as core elements of any revised framework.
The substantive change would involve when and how taxes are calculated rather than whether crypto transactions are taxable. Additionally, any meaningful reforms would require either legislative action from Congress or formal regulatory updates from the Treasury Department and IRS.
Industry observers note that policy papers and advocacy efforts do not carry regulatory force. For now, all existing IRS rules and reporting requirements remain fully enforceable across the cryptocurrency sector.
Whether US tax authorities will pursue legislative changes remains uncertain, as both the IRS and Congressional committees continue reviewing digital asset policy. No specific timeline has been announced for potential regulatory updates or hearings on the industry’s proposals.