US Crypto Tax Breakthrough? Bipartisan Bill Offers Stablecoin Safe Harbor, Staking Relief

The United States’ cryptocurrency tax landscape is on the cusp of a significant transformation. A bipartisan effort in the House of Representatives has introduced a landmark tax reform proposal, the Digital Asset PARITY Act. This crucial legislation aims to establish a “tax-free safe harbor” for everyday stablecoin payments and provide a much-needed compromise on the contentious issue of when staking rewards should be taxed.

Spearheading this initiative are Republican Representative Max Miller of Ohio and Democratic Representative Steven Horsford of Nevada. Both influential figures serve on the House Ways and Means Committee, underscoring the bill’s potential legislative weight.

Stablecoin “Safe Harbor”: Capital Gains Exemption for Small Transactions

For years, a major impediment to the mainstream adoption of cryptocurrencies for daily transactions in the U.S. has been the tax treatment. Each micro-transaction, such as buying a coffee with crypto, is currently considered a “property disposition,” triggering a capital gains tax calculation. This burdensome requirement has stifled the growth of crypto as a viable payment method.

The Digital Asset PARITY Act directly addresses this by proposing a capital gains tax exemption for payments made using regulated, 1:1 USD-pegged stablecoins, provided the single transaction amount is under $200.

Crucially, this provision is designed specifically for “payment utility” rather than investment activities. The draft explicitly states that this tax-free safe harbor will not apply to other cryptocurrencies like Bitcoin or Ethereum, nor will it extend to brokers or dealers.

To qualify for this safe harbor, stablecoins must meet stringent criteria: they must be issued by institutions authorized under the “GENIUS Act,” be exclusively pegged to the U.S. dollar, and demonstrate price stability within 1% of $1 for at least 95% of trading days over the preceding 12 months.

Legislators are still deliberating whether to impose an annual total transaction cap to prevent potential abuse of this provision for tax evasion, as outlined in the draft.

Staking and Mining Rewards: A 5-Year Deferral Option

One of the most keenly watched aspects of the Digital Asset PARITY Act is its proposed solution for the taxation timing of mining and staking rewards. This issue has long been a source of significant political and practical contention within U.S. cryptocurrency tax policy.

Under existing guidance, reiterated by the U.S. Internal Revenue Service (IRS) during the Biden administration, mining and staking rewards are deemed taxable income at the moment of acquisition. This often forces investors to pay substantial taxes on assets they may not have yet liquidated, leading to widespread industry backlash.

In response, the Digital Asset PARITY Act introduces a pragmatic compromise: taxpayers would be permitted to defer reporting these rewards for five years. Upon the expiration of this deferral period, the rewards would be taxed as ordinary income based on their fair market value at that time.

While offering leniency on the payment and reward deferral fronts, the Digital Asset PARITY Act also seeks to align digital asset taxation with traditional financial industries by strengthening anti-tax evasion measures at the transaction level:

• Prohibition of “Wash Sales”: Mirroring stock market regulations, cryptocurrency investors would be barred from artificially inflating costs or offsetting profits through short-term buying and selling of losing assets for tax avoidance.
• Deemed Sale Rule: This provision aims to prevent strategies where investors lock in profits but intentionally delay tax payments.
• Extension of Securities Lending Rules to Cryptocurrencies: For liquid, fungible digital assets, the act of lending itself would not constitute a taxable event, similar to traditional securities lending.

Additionally, the bill offers professional traders the option to elect a “mark-to-market” accounting method. It also waives qualified appraisal requirements for charitable donations of crypto assets with a market capitalization exceeding $10 billion.

The Digital Asset PARITY Act further clarifies that “passive, protocol-level staking” undertaken by investment funds should not be classified as a trade or business activity, thereby preventing additional tax burdens for such entities.

According to the draft’s timeline, the stablecoin tax-free safe harbor provision is slated to apply to tax years beginning after December 31, 2025. Representative Max Miller expressed optimism that the comprehensive bill could be passed by August 2026.