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A growing clash between U.S. tax policy and the fast-evolving cryptocurrency sector has prompted renewed calls for reform from lawmakers in Washington. Senators Cynthia Lummis (R-WY) and Bernie Moreno (R-OH) have raised concerns about the unintended consequences of the Biden-era Corporate Alternative Minimum Tax (CAMT) and its potential impact on American crypto firms.
The senators are calling on the U.S. Treasury Department to exclude unrealized gains on digital assets from CAMT calculations. Their central argument is that taxing crypto companies on gains they have not yet realized — meaning gains that exist only on paper and have not been converted to cash — could unfairly burden firms and potentially force them to sell assets just to meet tax obligations.
In a joint letter addressed to Treasury Secretary Scott Bessent, Lummis and Moreno emphasized that the current application of CAMT distorts financial reporting and penalizes innovation. They argue that the rules could discourage companies from maintaining significant holdings of digital assets, undermining the U.S. position as a leader in blockchain and digital finance.
“Failure to provide this clarity on unrealized gains in digital assets might require corporations to sell assets just to pay the tax,” the letter states. “It would disincentivize entities from maintaining large holdings of digital assets and harm innovation.”
The CAMT framework, introduced under the Inflation Reduction Act, imposes a 15% minimum tax on corporations with an average Adjusted Financial Statement Income (AFSI) of $1 billion or more over a three-year period. Designed to prevent highly profitable companies from avoiding taxes through loopholes, the measure could have unintended consequences for firms in the crypto industry that hold volatile assets like Ethereum or Bitcoin on their balance sheets.
Adding to the complexity is a recent change in accounting standards. In late 2023, the Financial Accounting Standards Board (FASB) issued rule ASU 2023-08, which requires companies to mark their crypto assets to fair market value. While initially praised for improving transparency, the shift means that the unrealized gains and losses in crypto assets now appear on company financial statements — which, under CAMT, can directly influence a company’s tax liability.
The senators argue that this double-edged effect — combining mark-to-market accounting with the CAMT rule — could significantly inflate taxable income for crypto firms, even if those gains are never actually realized through sales. This, they claim, could drive companies to move operations offshore to avoid excessive taxation.
“Our edge in digital finance is at risk if U.S. companies are taxed more than foreign competitors,” Senator Lummis warned in a public statement. “To lead the world in digital assets, we need a level playing field.”
Lummis is also the co-sponsor of the recently reintroduced BITCOIN Act, a proposal that would allow the U.S. Treasury to accumulate up to one million BTC over five years and establish a national Bitcoin reserve. While the bill is seen by some as symbolic, it underscores her broader push for a more crypto-friendly regulatory environment.
Still, despite bipartisan concern and industry lobbying, the likelihood of major crypto tax reform in the short term remains low. According to prediction platform Polymarket, there’s currently just a 1% chance that former President Donald Trump — should he return to office — would eliminate capital gains taxes on crypto before June 2025.
Meanwhile, companies in the crypto space continue to face mounting compliance challenges. Without immediate changes, industry leaders warn that the combination of accounting changes and tax burdens could suppress investment and slow innovation within U.S. borders.
Lummis and Moreno argue that the unintended consequences of current tax policy stem from relying on financial accounting standards, set by a private organization, as the basis for federal tax rules. “Neither Congress nor FASB planned this outcome,” the senators wrote. “It’s the unintended result of basing tax liability on decisions by a private organization, not principles of taxation.”
As the digital asset sector matures, lawmakers are increasingly recognizing the need for tax clarity and fairness. Whether those reforms arrive in time to prevent a brain drain and capital flight from the U.S. remains to be seen.
