Tax Coalition Formed To Develop Tax Policies For The Virtual Currency Market

On March 8, 2017, the Chamber of Digital Commerce and Steptoe & Johnson LLP, an international law firm headquartered in Washington, D.C., announced the establishment of the Digital Assets Tax Policy Coalition, which will also be located in Washington, D.C., to assist with developing efficient tax policies to expand the virtual currency market.

Steptoe will serve as counsel for the Coalition, while the Chamber of Digital Commerce will lead a select group of industry participants, including some of the top exchanges, wallet providers, and transaction processing companies in the digital asset sector.

"Blockchain and digital asset technologies pose unique challenges to tax administration. We look forward to working with the Coalition to develop policies that minimize compliance burdens for the industry while also providing the IRS the tools it needs to administer the tax code effectively and efficiently," said Cameron Arterton, of counsel at Steptoe.

Last November, a federal court authorized the IRS to issue a “John Doe” summons on digital asset exchange Coinbase for voluminous records relating to its users, as part of an investigation into whether US citizens were using virtual currencies for tax evasion. The creation of the Coalition comes after Coinbase and Coinbase user, Jeffrey Berns, filed motions in court challenging the summons.

"We are proud to be working with the industry's leading companies to engage with policymakers on an issue of vital importance to the sector. Tax solutions that allow the IRS to do its job without resorting to actions such as a John Doe summons will be of benefit to all," said Jason Weinstein, partner at Steptoe and co-chair of Steptoe's Blockchain and Digital Currency practice.

The Digital Assets Tax Policy Coalition’s goal is to develop policies that will allow the digital asset industry to grow while helping the government make sure people and businesses comply with the tax code. These policies would be used by the IRS to implement the recent recommendations by the Treasury Inspector General for Tax Administration, which had concluded that the IRS’s previously issued guidance was insufficient to provide taxpayers with enough information to comply with their tax obligations relating to virtual currency transactions.

"Clear tax treatment for digital assets is essential to ensure robust growth of this important sector," said Perianne Boring, president and founder of the Chamber of Digital Commerce.

The Digital Assets Tax Policy Coalition is another effort by the digital asset industry to coordinate with government officials on issues concerning virtual currencies. In 2016, the Chamber of Digital Commerce co-founded the Blockchain Alliance to function as a resource for law enforcement and regulatory agencies, in order to combat criminal activity on the blockchain.