US Lawmakers Slam Treasury Over Unrealized Crypto Tax Grab—’Innovation Stranglehold’

Washington draws a line in the sand as legislators push back against proposed crypto accounting rules that would tax paper gains. Critics call it a cash grab on volatility—because nothing says ’financial innovation’ like penalizing companies for market swings they didn’t cash in on.

The move could force US firms to liquidate positions just to cover theoretical tax bills—another masterclass in regulatory foresight. Meanwhile, decentralized protocols laugh in permissionless.

CAMT and mark-to-market accounting

The issue stems from the interaction between the Inflation Reduction Act’s CAMT provision and new mark-to-market requirements issued by the Financial Accounting Standards Board (FASB). 

While the accounting shift, secured after prior engagement from crypto-friendly lawmakers, was designed to reflect fair-value treatment of crypto in corporate financial statements, it inadvertently subjected unrealized gains to taxation under CAMT for companies averaging $1 billion or more in AFSI.

The senators noted that Congress never intended to tax unrealized gains in this context and criticized the reliance on FASB, a private body focused on financial reporting rather than tax principles.

They wrote that “neither Congress nor FASB planned this outcome,” adding that the Treasury has clear authority under Sections 56A(c)(15) and (e) of the Internal Revenue Code to adjust AFSI definitions.

They also pointed to a 2023 IRS notice providing interim relief to the insurance industry as precedent for immediate guidance and regulatory flexibility. 

The letter stated that “failure to provide this clarity might require corporations to sell assets just to pay the tax.”

Cedar Innovation Foundation presses Senate

The letter comes amid broader frustration within the crypto industry over stalled legislation in the Senate and Congress after lawmakers pushed back against crypto and stablecoin-related bills that aim to provide regulatory clarity.

On May 13, the Cedar Innovation Foundation, a major component of the crypto-focused super PAC Fairshake, issued a public statement urging the Senate to finalize stablecoin legislation without delay.

Josh Vlasto, spokesman for the foundation, said:

The statement warned that further delays “put American competitiveness and consumers at risk.”

Fairshake has emerged as one of the crypto sector’s most well-funded political action committees. It backs candidates from both parties in the 2024 and 2026 election cycles.

The senators’ letter and Cedar’s statement highlight the concerns regarding creating clear rules for the crypto industry to thrive safely in the US.