House Budget Chairman Jodey Arrington (R-TX) on June 17 issued a press release highlighting H.R. 9172, the 'Applying Existing Tax Anti-Abuse Rules to Digital Assets Act,' which was introduced in the House on June 8 and referred to the House Ways and Means Committee. The bill extends wash sale and constructive sale restrictions to digital assets, blocking investors from claiming losses after rapid repurchases within a 30-day window. The IRS currently treats digital assets as property for federal income tax purposes, leaving many cryptocurrency trades outside wash sale rules written for stocks and securities—a gap Arrington described as creating 'loopholes that undermine parity and equal treatment under the law.'
H.R. 9172 Replaces Stock-Based Wash Sale Rules With Specified Assets Category
Section 2 of H.R. 9172 changes the wash sale statute by replacing 'stock or securities' with 'specified assets,' a category that includes stocks, securities, and digital assets, except qualified U.S. dollar stablecoins. Investors would face the same 30-day window used in traditional markets: a loss could be denied when a taxpayer sells a covered asset and enters a substantially identical position within 30 days before or after the transaction. The bill also extends similar treatment to certain short sales and futures contracts. Arrington stated: 'My Applying Existing Tax Anti-Abuse Rules to Digital Assets Act closes these loopholes by applying the same commonsense safeguards that already apply to similar traditional financial assets, providing greater certainty for taxpayers and supporting the continued growth of America's digital asset economy.'
Bill Exempts Qualified U.S. Dollar Stablecoins and Validation Rewards From Wash Sale Rules
Qualified U.S. dollar stablecoins sit outside the bill's wash sale definition. The proposal also protects digital assets received through validation activities, including staking, mining, and similar work used to support digital asset transactions. Tokenized and wrapped assets receive separate treatment: a tokenized digital asset, or certain wrapped digital assets, could be treated as substantially identical to an economically equivalent stock, security, or digital asset. House Ways and Means Committee Chairman Jason Smith (R-MO) said: 'Bad actors should not be able to game the system and evade longstanding anti-abuse rules by moving from traditional financial assets to digital assets.' He added: 'Congress established anti-abuse rules like the wash sale and constructive sale provisions to close loopholes and protect the integrity of our tax system. However, because those rules were created before digital assets existed, a regulatory gap has emerged that some individuals have exploited.'
Constructive Sale Rules Extended to Widely Traded Digital Assets Above $500 Million Market Cap
H.R. 9172 expands constructive sale rules to digital assets, excluding qualified U.S. dollar stablecoins. Constructive sale rules generally apply when investors use certain transactions to effectively lock in investment gains without selling the asset and recognizing taxable income. The bill defines a 'widely traded digital asset' as one that is actively traded on an exchange and meets certain size and ownership requirements: the asset must have a market value exceeding $500 million during the previous year, and the taxpayer and related parties cannot own more than 10% of it. The $500 million threshold would be adjusted for inflation after 2027.
Changes Apply to Dispositions After June 8 Introduction Date
H.R. 9172 does not create a new crypto tax rate. It changes how existing anti-abuse rules apply to digital assets, with wash sale changes covering dispositions after the bill's introduction and constructive sale changes covering constructive sales after that date.
FAQ
What does H.R. 9172 do to cryptocurrency tax treatment?
H.R. 9172, introduced in the House on June 8, extends wash sale and constructive sale rules to digital assets by replacing 'stock or securities' with 'specified assets' in the tax code. Investors would be subject to a 30-day window restriction, meaning a loss could be denied if they sell a covered asset and enter a substantially identical position within 30 days before or after the transaction.
Which digital assets are exempt from the new wash sale rules?
Qualified U.S. dollar stablecoins are exempt from the wash sale definition. Digital assets received through validation activities—including staking, mining, and similar work used to support digital asset transactions—are also protected from the wash sale expansion.
How does the bill define a widely traded digital asset for constructive sale purposes?
The bill defines a 'widely traded digital asset' as one actively traded on an exchange with a market value exceeding $500 million during the previous year, where the taxpayer and related parties own no more than 10% of the asset. The $500 million threshold would be adjusted for inflation after 2027.
