Future Executive Order Reports are an opportunity to correct the broken tax treatment of block rewards and return dangerous monitoring proposals.
July 17, 2025, Jason Samensatt
President Trump’s Executive Order on Digital Assets (EO 14178) directed the head of the agency sitting in the president’s working group in the digital assets market and directed them to produce a report reassessing outdated or ineffective policies that hamper responsible innovation in crypto. As the Treasury contributes to its reporting, it has the opportunity and responsibility to address some of the most detrimental failures, particularly those derived from IRS guidance and the creation of Fincen rules, particularly those in crypto policy.
The two issues are particularly ripe for rethinking.
Taxing compensation as “income” is meaningless
For more than a decade, the IRS has taken a stand to block rewards for creating Newly created tokens acquired by miners or validators to maintain their network. This view has been formalized in the revenue controls that the IRS notifies 2023-14 and 2014-21, and fundamentally misunderstands the nature of the block’s rewards.
Block rewards are not income received from third parties. They are new properties created by participants in the open network. Taxing as a creation-time income rather than a disposal property, the fantastic consequences, unjust ordinary tax rates, and the calm impact on US decentralized innovation, this approach has not been supported by years of tax principles and needs to be reversed.
Yesterday I testified before the House of Representatives at a hearing entitled “Make America the Cryptocurrency of the World: Securing Digital Asset Policy Built for the 21st Century.” My comments emphasized that block rewards should be treated the same as other newly created forms. We don’t tax farmers the moment the crop grows outdoors or the moment the manuscript is finished. If property is sold or exchanged for something of value, we will tax revenues. Block rewards are no exception. The Treasury must use the opportunity created in EO 14178 to correct this discrepancy and recover parity.
The Coin Center supports the Jarrett lawsuit in the Sixth Circuit. This challenges the IRS’ position that rewards are taxed at the time of creation.
Daily user monitoring is not a “procrypt” policy
The Ministry of Finance’s October 2023 cryptocurrency mixer proposal gives an incredibly broad view of who should be subject to financial surveillance. This proposed rule specifies all mixing transactions as “major money laundering concerns” and requires that information be reported to financial institutions about each customer with a direct or indirect connection with the mixer. If confirmed in the current format, this rule wipes out regular users of cryptocurrency who engage in privacy-based behaviors, such as avoiding address reuse and using basic tools to protect transactional data.
These behaviors are not inherently questionable. They are essential to personal financial privacy in a public ledger environment. Treating them presumably as illegal is inconsistent with both civil liberties and the EO directive to promote responsible innovation.
Coin Center submitted a comment letter in January 2024 in response to this proposed rule. Fincen’s proposed rules argued that even purely domestic transactions would result in serious collateral outcomes, such as account closures, despite the fact that Fincen itself cannot determine whether such transactions are foreign or illegal. This rule circumvents the statutory restrictions of the US Patriot Act. This denies legitimate proceedings by only approving such designations for transactions involving foreign jurisdictions and not providing separate notices or hearings before labeling their activities suspiciously. This drastic approach threatens both financial privacy and basic constitutional protections. There remains a chance that Fincen will complete this rule at any time. The Treasury should either drop rulemaking completely or issue a new NPRM with a significantly narrower class of covered activities.
The moment to fix this is now
Trump’s EO provides the Treasury with the opportunity to set things up correctly. Not only by calling for challenges, but by recommending action. The Ministry of Finance:
Revisit and cancel old guidance on block rewards. Instruct Fincen to drop or narrow down rule creation to avoid criminalizing normal user privacy.
These are not radical ideas. They are simple modifications rooted in fairness, functionality, and fidelity to established legal principles. By getting them right, we protect users, promote clarity and maintain American leadership in digital assets innovation.
