This blog was last updated on October 6, 2025

The crypto industry stands at a pivotal moment. With the Trump administration’s pro-innovation stance and the release of the comprehensive White House Digital Assets Report, we’re witnessing a fundamental shift in how federal policy approaches digital assets. At Coindesk’s recent Policy and Regulation event, multiple roundtables convened simultaneously to examine the full spectrum of regulatory and legislative challenges facing the digital asset ecosystem.

Our taxation roundtable—co-led with Jessalyn Dean from Ledgible and Wendy Walker from Sovos, and featuring Erika Nijenhuis from the U.S. Treasury Department—focused on Chapter VII of the White House Digital Assets Report. This chapter represents more than technical guidance; it’s a roadmap for addressing longstanding ambiguities that have plagued crypto entrepreneurs, investors, and tax professionals.

Why Digital Asset Tax Policy Matters Now

Federal tax policy should recognize the unique characteristics of digital assets and address longstanding requests for guidance. For years, the crypto community has operated with murky guidance—a patchwork of rules, often released long after taxpayers filed returns, and significant gaps on critical issues like staking rewards treatment and 1099 reporting requirements.

Chapter VII tackles substantive tax issues that have created compliance challenges. From staking rewards and mining income to wrapping transactions, these fundamental questions affect how businesses operate, and individuals manage digital asset portfolios.

Creating a New Asset Class Beyond Securities and Commodities

One significant topic explored was recharacterizing digital assets as their own distinct asset class—rather than forcing them into traditional “securities or commodities” frameworks. However, participants first clarified a crucial distinction: in tax law, securities and commodities definitions don’t follow SEC or CFTC definitions that most industry participants assume.

The IRS views “securities” as investment products representing ownership or debt, while “commodities” are tangible raw products, futures contracts, or actively traded derivatives. Under IRC §475, securities include stock, partnership interests, bonds, and derivatives, while commodities encompass physical commodities, notional principal contracts, and derivative instruments.

Discussion revealed that the Treasury and the IRS are considering that many digital assets don’t fit neatly within current definitions. Two approaches are being analyzed: creating an entirely new asset class for all digital assets, or designating some as securities or commodities under existing laws. Categories like “actively traded fungible digital assets” could become distinct classifications with tailored IRC §475 rules—mirroring how derivatives eventually received bespoke tax treatment.

The Need for Industry Input

The White House report identifies several areas where the Treasury and the IRS can provide guidance under existing authority without waiting for Congress. But which issues need the most urgent industry input? Discussion focused on critical gaps like the tax treatment of wrapping/unwrapping transactions and the ongoing uncertainty around staking and mining rewards.

Participants revealed a key challenge: regulatory staff writing these rules are prohibited from using crypto products themselves—they can’t set up exchange accounts, experiment with DeFi protocols, or understand how wrapping transactions actually work in practice. This regulatory firewall makes detailed industry feedback essential for creating workable rules.

The timing matters. While formal comment periods exist, they typically happen after proposed regulations are published. To avoid regulations that miss the mark, industry needs to engage now with concerns, practical insights, and implementation ideas. The discussion emphasized that the Treasury and the IRS genuinely want this input—through formal channels like the IRS Advisory Council and direct company conversations—but industry must be proactive in providing it.

The Staking Tax Conundrum

Detailed discussion centered on staking and mining rewards, with the Jarrett case illustrating complexities. Analysis revealed that Jarrett performed his own active “baking” (staking) for 70% of staking rewards income while 30% came from staking rewards without active participation (e.g. passive delegation to other unrelated “bakers” who staked on his behalf). Discussions focused on how the distinction can affect the taxation and any associated 1099 reporting of the transactions.

A key takeaway was that there are numerous ways that blockchains may operate differently to each other. Industry feedback helps highlight these cases to the Treasury and the IRS so that they can contemplate practical guidance that can withstand many decades of changing technology.

Further discussion centered on whether deferring the taxation of staking rewards until they are sold is good policy for the US government and good policy for the taxpayer. But this prompted a roundtable participant to raise an important concern about network security and efficiency. The participant explained that when staking rewards are taxed upon receipt, stakers typically cash out immediately to cover tax obligations, which undermines the network security and efficiency since those rewards are meant to be re-staked in an ideal ecosystem. The participant suggested there might be non-tax reasons to encourage long-term holding of staking rewards.

However, other participants countered with the downside to the taxpayer of deferring taxation. They demonstrated why deferring taxation of staking rewards until the time they are sold may give a higher rate of taxation (in an assumed appreciation environment). When staking rewards are taxed at the time of receipt, then ordinary income taxation at marginal tax rates applies. You must recognize income equal to fair market value when received, setting your basis regardless of future holding.

Any appreciation qualifies for capital gains tax rates on top of already-taxed ordinary income at marginal rates. In the alternative scenario where taxation of staking rewards is deferred until they are sold, then all appreciation is taxed as ordinary income at marginal tax rates.

Under current guidance, receiving $1,000 in rewards that drop to $200 still means owing tax on the full $1,000 at ordinary income marginal tax rates while having only $200 in assets. If sold at a loss, the $800 capital loss may be used to offset other capital gains. Crypto volatility makes holding dangerous, and stakers need fiat for tax bills. It’s a misnomer that holding avoids taxation—ordinary income tax triggers upon receipt. The only holding benefit is potential additional capital gains, but you’re taking market risk after triggering tax liability.

The 1099-DA Delivery Challenge

A particularly tactical issue emerged during our roundtable: how can digital asset businesses efficiently deliver the massive volume of 1099-DA forms required under the 2025 rules while maintaining IRS compliance? The scale of this challenge is staggering—with estimates of 8 billion forms annually and customers potentially receiving thousands of individual forms.

Current regulations require brokers to mail physical forms or obtain separate electronic consent (See Treas. Reg. § 1.6045-1(k)(1)). For high-frequency trading customers, this creates impossible compliance burdens—imagine mailing tens of thousands of forms to one trader.

But the challenge extends beyond logistics: how can taxpayers efficiently process thousands of 1099-DA forms to prepare accurate tax returns? One of the primary purposes of third-party reporting is giving taxpayers information they need for tax preparation but receiving thousands of individual forms defeats this purpose entirely.

In their 2024 report, IRSAC recommended that brokers be allowed to furnish 1099-DA forms electronically (provided all other communications with the taxpayer are conducted electronically), rather than requiring specific consent for tax information delivery. This approach would recognize that customers already engaging digitally have implicitly consented to electronic communication.

However, roundtable participants explained that agencies lack authority to eliminate consent requirements—it’s written into law requiring Congressional action. Fortunately, the White House report acknowledges this challenge and indicates regulations are being considered for “a less burdensome method of obtaining consent,” offering hope for workable solutions.