In a rare display of bipartisan cooperation on digital asset policy, Representatives Max Miller (R-Ohio) and Steven Horsford (D-Nevada) have unveiled a sweeping draft framework designed to modernize how the United States taxes cryptocurrency.
The proposal, tentatively titled the Digital Asset PARITY Act, seeks to resolve some of the industry’s most persistent headaches—specifically the taxation of small, everyday transactions and the complex accounting of blockchain rewards. But the legislation has a downside for investors, since it includes a provision to eliminate the “wash sales” loophole that permitted those who traded in cryptocurrency to take advantage of tax losses in a much more beneficial, aggressive manner than those trading in the stock market.
The ‘Latte Exemption’
The proposal seeks to implement an exemption for small stablecoin transfers by providing a “de minimis” status. Presently, the Internal Revenue Service (IRS) treats any expenditure of cryptocurrency as a taxable event and subject to capital gains tax.
If a user buys a stablecoin and its value fluctuates even slightly before they use it to buy a cup of coffee, they technically owe capital gains tax on the difference—or can claim a capital loss.
A Miller-Horsford Draft seeks to establish a Safe Harbor for transactions involving regulated dollar-pegged stablecoins under $200. This provision aims to treat digital dollars more like actual currency and less like property for small, daily purchases.
“America’s tax code has failed to keep pace with modern financial technology,” Rep. Miller said in a statement accompanying the draft. “This bipartisan legislation brings clarity, parity, fairness, and common sense to the taxation of digital assets.”
Relief for Miners and Stakers
One of the most substantial changes in the structure of the bill impacts how blockchain rewards are treated. For years, miners and validators have complained about “phantom income”—the requirement to pay income tax on digital assets the moment they are created or received, often long before they are sold for cash.
The new framework offers a compromise: taxpayers could elect to defer taxes on mining and staking rewards for up to five years. The tax bill would only come due when the assets are sold or at the end of the five-year window, whichever comes first. The rewards will be taxed as income based on the fair market value at that time. This deferral option is meant to avoid situations where validators are compelled to sell off their rewards right away to pay for the tax liability created when they receive them, a situation industry advocates say inhibits the growth and development of networks.
Closing the Wash Sale Loophole
While the bill provides incentives for users and miners alike, it penalizes traders who actively trade digital currencies. This legislation will explicitly apply the “wash sale” rule to cryptocurrency.
At the moment, traders who own cryptocurrencies or other types of digital assets can sell their coins (specifically) for less than what they originally paid for them and use this “loss” to offset their taxable income; essentially, they pay no taxes on the capital gain they made from re-purchasing the coins shortly after selling them at a loss.
In the standard market, the wash sale rule disallows an individual from claiming the deduction on a security if they purchase a “materially identical” security within 30 days of selling it (the same time as the price drop).
If this legislation passes, digital currency traders will have to follow the same restrictions as stock market investors and halt one of the methods for minimizing taxes associated with trading digital currencies (specifically the ability to create a tax loss).
A Framework for 2026
The bill also proposes allowing qualifying active traders the ability to utilize “mark-to-market” accounting, which allows for the easier tax reporting of gains and losses for those actively trading.
As it stands at present, this proposal is in a discussion draft format and has yet to be enacted into law. In order to receive input from both affected parties as well as from tax professionals, Miller and Horsford are circulating the draft to these individuals prior to introducing it on the House floor. With the end of the legislative calendar for 2025 approaching, this measure will be a key issue within the tax policy debate as 2026 approaches.
“We need a tax code that recognizes the unique nature of these assets without stifling the innovation they represent,” Rep. Horsford noted. “This draft is the starting line for that conversation.”
