Miller and Horsford have introduced the "Digital Asset Parity Act," which would grant capital gains tax exemptions for qualifying stablecoin transactions.
Under the draft bill, stablecoin transactions valued at less than $200 would no longer be subject to capital gains tax. This "safe harbor" provision applies exclusively to regulated, dollar-pegged stablecoins and does not extend to other cryptocurrencies like Bitcoin or Ethereum.
The bill also proposes a compromise on the tax treatment of staking and mining rewards, allowing taxpayers to defer related taxes for five years.
01 Legislative Background
U.S. Representatives Max Miller and Steven Horsford are developing a cryptocurrency tax framework called the "Digital Asset Parity Act." Both lawmakers serve on the House Ways and Means Committee, which oversees U.S. tax law.
The draft aims to address longstanding tax uncertainty in the crypto sector, seeking to align the taxation of digital assets with the treatment of traditional securities.
Lawmakers are starting with stablecoins, partly because Congress has already passed legislation regulating them. The bill attempts to strike a balance between the existing tax system and the evolving crypto industry.
02 Stablecoin Safe Harbor
According to the new draft, transactions involving regulated, dollar-pegged stablecoins valued under $200 would be exempt from capital gains tax.
To qualify for this tax exemption, stablecoins must meet strict criteria: they must be issued by entities licensed under the GENIUS Act, be fully backed by U.S. dollars, and maintain a price within $1 ±1% on at least 95% of trading days over the past 12 months.
This "safe harbor" applies only to everyday consumer payment scenarios, excluding transactions between brokers or dealers and does not apply to other cryptocurrencies.
Lawmakers are also considering whether to set an annual aggregate cap to prevent the provision from being used for tax avoidance rather than facilitating daily spending.
03 Staking Reward Tax Compromise
The bill’s provisions on staking and mining rewards represent a key compromise. Currently, under IRS guidance issued during the Biden administration, staking and mining rewards are taxed as income when received.
Senator Cynthia Lummis has proposed an alternative approach, suggesting rewards should only be taxed upon sale.
The new draft takes a middle ground: it allows taxpayers to defer taxes on staking and mining rewards for five years. After five years, these rewards would be taxed as ordinary income based on their fair market value.
The bill describes this as "a necessary compromise between immediate taxation and full deferral until disposition."
04 Other Key Provisions
Beyond the tax treatment of stablecoins and staking rewards, the "Digital Asset Parity Act" includes several other important regulations:
Cryptocurrencies would be subject to the same tax rules as securities, including the "wash sale rule," which prevents investors from claiming tax deductions by selling assets at a loss and then immediately repurchasing them.
Professional traders would be permitted to use mark-to-market accounting. This method requires taxpayers to recognize unrealized gains and losses annually based on the fair market value of their securities.
For digital asset charitable donations exceeding $1 billion in market value, the bill would waive the qualified appraisal requirement. Additionally, it clarifies that passive protocol-level staking by investment funds does not constitute a trade or business activity.
05 Impact on the Crypto Market
If enacted, this tax framework could reshape how cryptocurrencies are taxed. For stablecoins, the exemption for small transactions may boost their use for everyday payments, especially for transactions under $200.
For staking participants, the five-year tax deferral offers greater flexibility. They can plan their tax obligations over a longer period, rather than facing immediate tax liability in the year rewards are received.
According to Miller, the stablecoin safe harbor provision is slated to take effect for tax years beginning after December 31, 2025, while broader aspects of the bill could move forward by August 2026.
06 Recommendations for Gate Users
For Gate users, the new tax framework will directly affect trading and staking strategies. Users should note that stablecoin transactions under $200 may qualify for tax exemption, potentially changing how small payments and transfers are handled.
Users involved in staking should consider how to leverage the five-year tax deferral option. This means staking rewards won’t trigger immediate tax consequences upon receipt, but will be taxed five years later.
Gate users should continue reporting all crypto transactions on appropriate tax filing platforms. Even if some transactions may qualify for new exemptions, maintaining complete transaction records remains essential.
It’s important to note that under current tax rules, crypto trading losses cannot offset other income, nor can these losses be carried forward to subsequent years. Whether this will change under the new framework remains to be seen.
Staying informed about regulatory changes and adjusting tax strategies accordingly is key to maintaining compliance in the crypto space.
Outlook
This new draft sends a clear message: lawmakers are taking crypto taxation seriously. As policies become more defined, the U.S. may set an example for other countries considering crypto tax legislation.
Representative Miller stated, "U.S. tax law hasn’t kept pace with the evolution of modern financial technology. This bipartisan legislation will bring clarity, consistency, fairness, and common-sense rules to the taxation of digital assets."
Crypto tax experts generally agree that clarity in tax law is vital for industry growth. Clear rules can reduce compliance costs and attract more traditional investors to the sector.
As cryptocurrencies become increasingly integrated into the mainstream financial system, standardizing and rationalizing tax treatment has become inevitable. Both individual users and institutional participants need to prepare for these changes.
