Bitcoin tax controversy pulls in Brian Armstrong, Jack Dorsey

While crypto investors fixated on the plummeting price of Bitcoin, something changed on Capitol Hill over the past three months: a Bitcoin tax break that seemed headed for passage is suddenly being limited to stablecoins.

One Bitcoin advocate thinks he knows why: Coinbase.

Yesterday, Ten31 managing partner and Bitcoin advocate Marty Bent fired the first shot, alleging that lobbyists from the US’s largest exchange were telling lawmakers that “no one is using Bitcoin as money” and pushing for tax exemptions that apply solely to stablecoins like USDC.

Bent claims to have spoken to three sources close to the matter.

USDC’s issuer, Circle, has had a strategic relationship with Coinbase since 2018, with the exchange earning revenue from USDC reserves.

Multiple Coinbase executives quickly denied Bent’s allegations, calling them “categorically false.” They said the company has advocated for tax exemptions covering “all digital assets,” including Bitcoin, since 2017.

“This is a total lie, Marty Bent,” wrote Faryar Shirzad, Coinbase’s chief policy officer. “We have never and will never lobby against Bitcoin. Ever.”

Then Block CEO Jack Dorsey got involved, publicly questioning Coinbase CEO Brian Armstrong.

“Hope this is true for de minimis as well. Brian Armstrong?” asked Dorsey.

In just one word, Armstrong joined his colleagues in denying the allegations.

De minimis exemption

At the core of the clash is something called a “de minimis exemption.”

It’s basically a tax break for small crypto purchases. Without a de minimis exemption, it would be impractical to use crypto for payments.

Right now, the US treats crypto as property, meaning that every sale triggers capital gains taxes. Buying a coffee with Bitcoin? You have to report to the Internal Revenue Service because that’s a taxable event.

But whatever Coinbase’s role, there has been a change on Capitol Hill, according to Conner Brown, of the Bitcoin Policy Institute.

“Over the past three months, there’s been a strong shift on the Hill to limiting the de minimis exemption to stablecoins only,” Brown wrote, although he did not name Coinbase directly.

A recent bipartisan discussion draft of the Parity Act from Representatives Max Miller and Steven Horsford limits the exemption to “regulated payment stablecoins” — explicitly excluding Bitcoin, according to the Bitcoin Policy Institute, a Bitcoin-focused advocacy group that operates in Washington, DC.

That’s a wide departure from pro-Bitcoin Senator Cynthia Lummis’s original proposal for taxing crypto, which provided a de minimis exemption for Bitcoin.

The shift began in 2025, following passage of the GENIUS Act, according to the Bitcoin Policy Institute. The group has met with 19 congressional offices over the past three months pushing back.

Multiple proposals

The clash between Coinbase and Bitcoin advocates is further complicated by the fact that right now there are multiple tax relief proposals floating around Capitol Hill simultaneously.

First there’s the aforementioned personal use de minimis exemption. Then there’s a separate gas fee exemption for transaction costs. And then there’s stablecoin-specific relief that would ignore gains or losses within one penny.

Different crypto constituencies want different things. Bitcoiners prioritise personal use relief while stablecoin users want gas fee exemptions. Brokers want to eliminate burdensome requirements for stablecoin transactions.

That could explain the claims that Bitcoiners have made about Coinbase.

“Likely, different market participants will advocate more strongly for different provisions,” Jason Schwartz, a prominent crypto tax attorney wrote on X. “That doesn’t necessarily mean they are ‘lobbying to kill’ others.”

Pedro Solimano is a markets correspondent based in Buenos Aires. Got a tip? Email him at [e-mail].