U.S. Lawmakers Push New Framework To Simplify Crypto Staking Tax Treatment

A bipartisan group in Congress is moving to reshape how the U.S. government taxes digital assets. Representatives Max Miller (R-OH) and Steven Horsford (D-NV) have introduced a draft legislative framework that addresses one of the crypto industry’s most persistent pain points: taxation of blockchain-based activities and transactions. The proposal seeks to create clearer rules for crypto staking while offering meaningful tax relief to everyday investors and traders.

Tax Relief For Stablecoin Users Under $200 Threshold

For those using stablecoins in daily transactions, the proposed legislation could bring significant relief. Regulated, dollar-pegged stablecoins transferred in amounts under $200 would be exempted from capital gains taxation. This targeted approach recognizes that many stablecoin transactions are functional payments rather than investment activities, eliminating unnecessary tax compliance burdens for low-value transfers.

The bill stops short of extending this exemption to other cryptocurrencies, keeping the tax advantages limited to stablecoins specifically. This distinction reflects ongoing policy debates about which digital assets qualify for preferential treatment and underscores the lawmakers’ focus on practical, everyday use cases.

Five-Year Deferral Option For Crypto Staking Rewards

One of the most anticipated provisions addresses crypto staking directly. The framework introduces an optional five-year postponement of income taxes on rewards earned through staking or mining operations. Rather than immediate taxation—the current IRS standard—participants could delay recognizing these rewards as income for up to five years.

After the five-year window expires, the rewards would be taxed as ordinary income calculated at their fair market value at the time of receipt. This represents a significant shift from present guidance and reflects the bill’s attempt to bridge ideological divides: Republicans have advocated for taxation only upon sale, while Democrats traditionally supported immediate taxation treatment. The proposal compromises by allowing investors to choose deferral while maintaining eventual tax obligations.

Aligning Crypto With Traditional Securities Tax Rules

Beyond staking income, the bill proposes broader alignment between cryptocurrency taxation and traditional securities markets. The framework would permit crypto traders to adopt mark-to-market accounting, a method where unrealized gains and losses are taxed annually based on current market values rather than waiting for actual sale events.

This accounting method offers practical advantages for active traders, allowing them to offset cryptocurrency losses against other taxable income streams. By bringing crypto into the same framework used for commodities and stocks, the proposal aims to create more consistent and transparent tax treatment across asset classes.

Closing Tax Loopholes: Wash Sale Rules Extended To Digital Assets

A critical component addresses tax avoidance strategies that have flourished in the crypto space. The draft would extend wash sale rules—long established in traditional securities—to digital assets. Wash sales occur when investors sell assets at a loss and quickly repurchase substantially identical holdings to claim tax deductions.

This loophole has been particularly exploited in cryptocurrency markets where rapid trading and price volatility make loss harvesting a common tax optimization tactic. Applying wash sale restrictions would close this gap and reduce opportunities for strategic loss harvesting in the digital asset market.

What This Means For The Broader Crypto Investor Community

The legislative framework signals a turning point in how Congress approaches digital asset taxation. By introducing both relief measures—such as stablecoin exemptions and staking tax deferrals—alongside new restrictions like wash sale rules, the bill attempts to balance investor relief with tax revenue protection.

The proposal also contains provisions supporting international investors by including digital assets in capital gains tax exemptions for foreign traders using U.S.-based platforms. This provision could strengthen the competitive position of domestic exchanges in the global crypto market while attracting international capital flows.

Currently in draft form, the proposal may evolve as it progresses through the House Ways and Means Committee, where both lawmakers serve. Their positioning within this influential tax-policy committee indicates this initiative has institutional backing. While final legislation may differ from the current framework, the bill represents renewed Congressional effort to build a comprehensive, modern approach to crypto taxation that reflects the realities of blockchain technology and digital finance.