U.S. Lawmakers Propose Major Overhaul of Cryptocurrency Tax Rules

A bipartisan group of House representatives has introduced a framework designed to fundamentally reshape how the United States taxes digital assets. Representatives Max Miller (R-OH) and Steven Horsford (D-NV)—both members of the influential House Ways and Means Committee—have unveiled a draft proposal that addresses years of confusion and uncertainty surrounding cryptocurrency taxation. The initiative seeks to bring much-needed clarity to an area where investors and blockchain participants have faced conflicting guidance and evolving standards.

Breaking Down the Key Provisions: Stablecoins and Staking Rewards

The proposal introduces two significant tax reliefs that directly benefit cryptocurrency users. First, regulated, dollar-pegged stablecoins involved in transactions under $200 would be exempted from capital gains tax requirements. This threshold specifically targets low-value transfers, recognizing that small stablecoin transactions have created administrative burdens without generating meaningful tax revenue.

Second, the framework introduces an optional five-year tax deferral on income generated through staking or mining activities. Rather than taxing rewards immediately upon receipt—the current IRS guidance—participants could choose to defer taxation for five years. After that period expires, the rewards would be taxed as ordinary income based on their fair market value at the time of receipt. This represents a middle ground between two competing philosophies: Republican lawmakers who prefer taxation only at the point of sale, and Democratic lawmakers who advocate for immediate taxation similar to traditional employment compensation.

How the Mark-to-Market Framework Changes Crypto Trading Taxes

The proposal modernizes the tax treatment of digital assets by applying mark-to-market accounting—a method traditionally used for securities and commodities. Under this framework, active cryptocurrency traders would calculate taxable gains and losses annually based on current market values, even if they haven’t sold their holdings. This approach allows traders to offset unrealized losses against other taxable income, potentially reducing overall tax liability.

Complementing this provision, the legislation extends wash sale rules to digital assets. Wash sales occur when an investor sells a security at a loss and quickly repurchases a substantially identical asset to capture the loss for tax purposes. By closing this loophole in the cryptocurrency market, the proposal aims to prevent strategic tax loss harvesting that has become common among crypto traders.

What This Means for Your Crypto Portfolio and Future Tax Strategy

For cryptocurrency investors and traders, this proposal could dramatically improve tax planning opportunities. The combination of mark-to-market accounting and wash sale rules would create a more consistent framework aligned with traditional securities taxation. Active traders benefit from the ability to offset losses across their portfolios, while staking participants gain flexibility through the optional five-year deferral option.

The legislation also addresses international investors. By including digital assets in capital gains tax exemptions for foreign traders using U.S.-based brokers or platforms, the proposal aims to strengthen the competitive position of domestic cryptocurrency exchanges in the global market. This move could attract more international capital to U.S.-based platforms and enhance their relevance in worldwide crypto trading.

From Draft to Law: The Path Forward for Crypto Taxation Policy

Though the proposal remains in draft form and may undergo significant modifications during the legislative process, it signals a crucial turning point. For the first time, the House Ways and Means Committee is formally addressing cryptocurrency-specific tax treatment separate from broader crypto regulatory discussions. This separation demonstrates recognition that digital asset taxation requires tailored solutions distinct from general regulatory reform.

The framework prioritizes bringing cryptocurrency taxation into alignment with established rules governing traditional financial instruments. As digital finance continues to evolve and grow, having comprehensive, clear tax guidance benefits both individual investors seeking certainty and policymakers aiming to prevent tax avoidance. Whether in its current form or through amendments, this bipartisan effort represents a significant step toward establishing a modernized cryptocurrency tax system.