The U.S. Congress has taken decisive steps to overhaul its virtual asset tax system, establishing clearer guidelines for mining and staking taxation while easing the tax burden on small stablecoin transactions. Meanwhile, South Korea lags behind, still embroiled in debates over virtual asset taxation as it approaches implementation next year, drawing criticism for its slow regulatory progress.
On Wednesday, the U.S. House Ways and Means Committee unveiled proposed virtual asset tax reform legislation via X (formerly Twitter), according to various news reports.
The proposed legislation covers several key areas: tax deductions for virtual asset donations, clarification of mining and staking taxation, simplified tax documentation for investors, a voluntary reporting system for virtual assets, and measures to prevent tax abuse.
The most significant aspect of the proposal is the clarification of mining and staking taxation. Industry players have long criticized the double taxation structure, where taxes are levied both when acquiring virtual assets through blockchain activities and when selling them.
In response, the bill aims to ease taxation on assets acquired through mining and staking, allowing for certain exceptions. It also proposes to exempt small stablecoin payments and blockchain transaction fees (gas fees) from capital gains tax on asset value fluctuations.
The legislation was developed collaboratively by the Ways and Means Committee and relevant departments, including the U.S. Treasury. Representative Jason Smith, chair of the House Ways and Means Committee, emphasized that overhauling the virtual asset tax system is a priority, separate from ongoing discussions about the Clarity Act.
This approach addresses criticisms that the existing tax system is overly complex and hinders innovation. The bill focuses on reducing the tax reporting burden for investors, particularly those who frequently receive mining or staking rewards or engage in numerous transactions, as they face especially complicated tax calculations and reporting processes.
Robin Singh, Chief Executive Officer (CEO) of Coinly, commented that while the Clarity Act is seen as a turning point for the virtual asset industry, the current tax system remains complex and inefficient. He highlighted issues such as missing information on acquisition costs and holding periods, and the lack of accurate reflection of decentralized finance (DeFi) and non-custodial wallet activities, which forces users to manually track their transactions.
Max Miller, a member of the House Ways and Means Committee, noted that the U.S. leads in virtual asset innovation, but our tax laws are struggling to keep up with market developments.
Chairman Smith stressed that the bill addresses tax issues unique to digital assets and reduces administrative burdens. He stated that if Americans prefer using stablecoins over credit cards or cash, they should be able to do so without facing complicated tax paperwork.
However, during the recent hearing, Democratic lawmakers raised concerns about the bill. This hearing marks the first step in the legislative process, which will involve drafting amendments, committee reviews, and a House vote.
If enacted, the bill is expected to alleviate the administrative burden on the IRS, which has seen a surge in reporting since introducing a new virtual asset tax reporting system this year, while also grappling with significant staff reductions since the Donald Trump administration.
In contrast, South Korea lacks bipartisan consensus on virtual asset taxation implementation. The ruling People Power Party has advocated for abolishing virtual asset taxation, while the opposition Democratic Party has yet to articulate a clear stance.
A proposed amendment to the Income Tax Act, set to take effect next January, would classify virtual assets as other income with a 22% tax rate. While the National Tax Service has begun preparing related systems, taxation criteria for airdrops and DeFi remain unclear, raising questions about the effectiveness of these measures.
An industry insider remarked that the U.S. is adapting its tax system to the realities of the growing virtual asset and stablecoin markets. South Korea needs to establish specific guidelines that reflect current market conditions.