Lawmakers Push Bipartisan Tax Relief for Crypto Traders and Stakers

📜 The PARITY Act: A New Tax Framework for Digital Assets

Two members of Congress have introduced legislation that could reshape how Americans pay taxes on cryptocurrency transactions. Representatives Max Miller of Ohio and Steven Horsford of Nevada unveiled the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Yields Act, known as the PARITY Act, on December 20. The bipartisan proposal aims to modernize the Internal Revenue Code of 1986 by addressing what lawmakers describe as excessive taxation on everyday crypto transactions, the phantom income problem affecting stakers and miners, and closing gaps that invite tax abuse. Miller emphasized that America's tax code has failed to keep pace with modern financial technology, while Horsford noted that even the smallest crypto transaction can trigger complex tax calculations while other areas lack clarity. The bill represents one of the most comprehensive attempts to bring regulatory clarity to digital asset taxation.

💵 Stablecoin Tax Relief: Exempting Everyday Payments

The PARITY Act would exempt capital gains tax on low-value stablecoin transactions under $200, provided the tokens meet specific criteria. To qualify for the exemption, stablecoins must be dollar-pegged, actively traded, and issued by a federally regulated entity. This provision addresses a longstanding complaint from crypto users that buying a coffee with stablecoin should not trigger a taxable event requiring complex cost basis calculations. Currently, even small purchases made with cryptocurrency create reporting obligations that discourage everyday use. The stablecoin exemption would begin in tax years starting after December 31, 2025, giving federally regulated stablecoin issuers time to prepare. For consumers and businesses alike, this change could remove significant friction from crypto-based payments. The $200 threshold mirrors existing IRS provisions for foreign currency transactions, applying familiar tax policy to digital assets.

⏰ Staking Tax Deferral: Solving the Phantom Income Problem

One of the most significant provisions allows stakers and miners to defer income recognition on their rewards for up to five years. Under current IRS guidance, staking rewards are treated as ordinary income at the moment they are received, creating what the industry calls phantom income. Stakers must pay taxes on rewards they may not have sold, potentially at values that later decline significantly. The bill's optional deferral mechanism would allow validators and miners to postpone recognizing income until they actually sell or dispose of the tokens. This addresses a major pain point for participants in proof-of-stake networks like Ethereum, where validators earn regular rewards but may prefer to hold them long-term. The deferral option gives crypto earners flexibility similar to traditional retirement accounts. For professional validators running staking operations, this change could dramatically improve cash flow management and reduce the burden of paying taxes on unrealized value.

🚫 Wash Sale Rules: Closing the Tax Loss Harvesting Loophole

While providing relief in some areas, the PARITY Act would apply longstanding wash sale rules to cryptocurrency for the first time. Currently, crypto is classified as property rather than securities, allowing traders to sell assets at a loss and immediately repurchase them to harvest tax losses. The wash sale rule prevents investors from claiming a tax loss if they repurchase the same or substantially identical asset within 30 days. Applying this rule to crypto would align digital assets with stocks and bonds, which have faced wash sale restrictions for decades. Tax professionals have long expected this loophole to close, and the PARITY Act would formalize the change. Traders who currently use year-end tax loss harvesting strategies would need to adjust their approach, waiting 30 days before repurchasing sold assets. The provision aims to prevent abuse while maintaining legitimate tax planning strategies.

📊 Mark-to-Market Accounting and Constructive Sales

The bill introduces additional provisions aimed at active traders and sophisticated tax strategies. A mark-to-market accounting election would allow active digital asset traders to recognize gains and losses annually based on fair market value, similar to options available for securities traders. This change could benefit high-frequency traders who currently face burdensome tracking requirements across hundreds of transactions. The legislation also applies the constructive sale doctrine to crypto, targeting derivative-based hedging strategies that defer tax indefinitely. Constructive sale rules treat certain hedging positions as if the underlying asset was sold, triggering capital gains taxes even when the original asset is still held. For institutional investors and sophisticated traders using complex strategies, these provisions require careful consideration. The bill additionally grants nonrecognition treatment to certain digital asset loans while excluding NFTs and thinly traded tokens, acknowledging the diversity of digital asset types and use cases.

🌍 Foreign Investor Benefits and Industry Impact

A notable provision extends tax benefits to foreign investors who trade crypto through U.S. brokers, potentially positioning American exchanges as more competitive globally. By offering favorable tax treatment to international traders, the bill could attract capital to U.S.-regulated platforms and boost domestic exchange volumes. While most provisions would take effect upon enactment, the stablecoin exemption's delayed start gives the industry time to adapt infrastructure. The comprehensive approach reflects growing bipartisan recognition that outdated tax rules hinder innovation and create compliance burdens. Industry advocates have lobbied for years for tax clarity, arguing that excessive reporting requirements and inconsistent guidance stifle growth. The PARITY Act's success will depend on whether it can navigate committee review and floor votes in a divided Congress. For crypto investors, traders, validators, and businesses, the proposed changes represent the most significant potential shift in U.S. crypto tax policy since the IRS first issued guidance on virtual currency in 2014. Whether the bill becomes law or serves as a starting point for future negotiations, it signals that policymakers are finally addressing the unique taxation challenges of digital assets.

Sources

https://www.coindesk.com/policy/2025/12/22/u-s-bipartisan-lawmakers-draw-up-tax-bill-with-stablecoin-and-staking-relief https://horsford.house.gov/media/press-releases/reps-horsford-miller-unveil-discussion-draft-to-bring-tax-clarity-to-digital https://tokentax.co/blog/wash-sale-trading-in-crypto https://www.coindesk.com/opinion/2025/12/22/the-clock-is-ticking-for-crypto-tax-loss-harvesting

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