The US House of Representatives is working on legislation that could significantly reshape how cryptocurrencies are taxed in the United States. The bipartisan proposal, known as the Digital Asset PARITY Act, aims to provide tax relief for everyday crypto users, investors, and developers while closing loopholes that lawmakers say enable tax avoidance.

Introduced on December 20, the bill is sponsored by Republican Max Miller of Ohio and Democrat Steven Horsford of Nevada. Its goal is to modernize the Internal Revenue Code of 1986 to reflect the realities of digital assets and modern financial infrastructure.

According to Miller, the US tax system has failed to keep pace with technological innovation. The proposal seeks to establish clearer rules, improve fairness, and strengthen tax compliance across the crypto sector.

Stablecoins as everyday payment tools

One of the bill’s most notable provisions is a capital gains tax exemption for low-value stablecoin payments. Transactions of up to $200 would be exempt, provided the stablecoins are pegged to the US dollar, actively traded, and issued by federally regulated institutions.

This change would significantly reduce the administrative burden associated with everyday stablecoin payments, removing the need to calculate tax consequences for minor transactions. Lawmakers argue that the current framework discourages broader crypto adoption by treating small digital payments differently from traditional ones.

Relief for staking and phantom income

The proposal also addresses the taxation of staking and mining rewards, where so-called phantom income often arises. Under current rules, users may owe taxes on rewards they have not sold or converted into fiat currency.

The Digital Asset PARITY Act would allow taxpayers to defer taxation of staking and mining rewards for up to five years, or until the assets are actually sold. This change would benefit long-term holders, network validators, and Blockchain developers, while aligning crypto taxation with principles already applied to traditional investments.

Tighter rules for active traders

Alongside tax relief, the bill introduces stricter oversight for active traders. It would extend wash sale rules to cryptocurrencies, preventing traders from generating artificial tax losses through rapid selling and repurchasing of the same assets.

The legislation also allows for the adoption of mark-to-market accounting for active crypto traders, requiring annual reporting of gains and losses based on current market value. Additionally, the bill expands the constructive sale doctrine to digital assets, targeting advanced derivative-based tax deferral strategies.

Crypto lending NFTs and foreign investors

The proposal includes provisions affecting crypto lending, potentially granting certain loans non-taxable treatment similar to that applied to securities. However, NFTs and illiquid tokens are explicitly excluded to prevent abuse.

Another notable element is expanded tax benefits for foreign investors trading cryptocurrencies through US-based brokers. Most provisions would take effect immediately upon enactment, with the exception of the stablecoin payment exemption, which would apply to tax years beginning after December 31, 2025.

Toward a clearer crypto tax framework

While still in discussion form, the Digital Asset PARITY Act signals a shift in how US lawmakers approach crypto taxation. Rather than piecemeal adjustments, the proposal aims to establish a comprehensive framework that protects users, provides clarity for investors, and limits opportunities for tax arbitrage. If enacted, it could mark a major milestone in the integration of cryptocurrencies into the US tax system.

Sources:

https://horsford.house.gov/sites/evo-subsites/horsford.house.gov/files/evo-media-document/miller-horsford_digital-asset-tax-bill-discussion-draft.pdf

https://horsford.house.gov/media/press-releases/reps-horsford-miller-unveil-discussion-draft-to-bring-tax-clarity-to-digital