Crypto Tax Rule Revision Advances as CFTC Nominee Withdrawn and SEC Clarifies Custody

• Treasury revises crypto tax rule to ease burden on unrealized Bitcoin gains.
• White House withdraws Brian Quintenz’s CFTC nomination after rising concerns.
• SEC clears state-chartered trust companies to provide crypto custody services.

The U.S. Treasury Department is drafting changes to a proposed rule under the Corporate Alternative Minimum Tax (CAMT) that would have impacted corporations holding digital assets. The crypto tax adjustment comes after concerns that companies would face obligations on unrealized Bitcoin gains, unlike equities which remain exempt from such treatment.

The CAMT sets a 15% minimum tax on financial statement income for large corporations. Under Financial Accounting Standards Board rules, crypto must be marked to market, meaning values are recorded at current prices regardless of sales. For companies like Strategy, with Bitcoin holdings valued at about $73 billion, this would have resulted in billions in additional crypto tax exposure.

Earlier this year, Strategy and Coinbase submitted a joint letter urging Treasury to exclude unrealized gains from the framework. They argued that taxing paper profits would compel firms to sell assets to meet obligations, place U.S. companies at a competitive disadvantage, and raise questions over the taxation of income that has not been realized.

The issue has gained traction as both Congress and the administration move to address digital asset taxation. A Senate Finance Committee hearing on crypto tax policy is scheduled for later this morning.

White House Ends Support for Quintenz Nomination

In parallel developments, the White House has withdrawn the nomination of Brian Quintenz to lead the Commodity Futures Trading Commission (CFTC). Quintenz, previously with a16z Crypto, had been awaiting a Senate Agriculture Committee vote when the administration placed his candidacy on hold.

Following leaked emails, disputes involving industry figures, and concerns about board positions and prior affiliations, his nomination was officially pulled. Quintenz described the nomination process as an honor, thanking both the President and the Senate committee.

The administration is now evaluating other candidates to replace Acting CFTC Chair Caroline Pham. Among those considered are SEC Crypto Task Force Chief Counsel Mike Selig, Milbank LLP partner Josh Sterling, Treasury adviser Tyler Williams, and former CFTC Commissioner Jill Sommers. A decision is expected shortly.

SEC Provides Guidance on Crypto Custody

The Securities and Exchange Commission has also issued new guidance impacting custody practices for digital assets. In a no-action letter, the SEC confirmed that state-chartered trust companies may serve as qualified custodians under the Investment Advisers Act of 1940.

Previously, investment advisers were expected to hold client assets with national banks or federally recognized trust companies. The clarification ensures that advisers and registered funds may now use state-chartered trusts without risk of enforcement.

Brian Daly, Director of the SEC’s Division of Investment Management, said the clarification addressed long-standing uncertainty. The decision is expected to expand opportunities for firms such as Coinbase, Ripple, Gemini, BitGo, and WisdomTree Funds to participate in crypto custody services.