Crypto regulations are still catching up to the industry’s pace. For retail players and small businesses, they remain complex, inconsistent, and often unclear.
Both sides of Congress are trying to improve upon the existing regulations.
Now, a new bipartisan proposal is aiming to simplify and modernize how the United States taxes digital assets.
The draft bill seeks to amend the Internal Revenue Code of 1986 to create a clearer, more equitable system for crypto users and businesses.
Related: GENIUS Act Passage Sets Foundation for Stablecoin Market to Reach $2 Trillion by 2028
On Dec. 20, Rep. Max Miller (R-Ohio) and Rep. Steven Horsford (D-Nev.) introduced the bill called the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Yields (PARITY) Act.
The bill outlines five major reforms:
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De minimis exemption for stablecoin payments
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Definition and sourcing of digital asset income
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Tax treatment of digital asset lending
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Expansion of “wash sale” rules
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Mark-to-market election for dealers and traders
The lawmakers said the goal is to align digital asset treatment with traditional finance while reducing unnecessary administrative burdens.
One of the most notable provisions would exempt small stablecoin transactions from capital gains taxes.
Under the proposed Section 139J, gains under $200 from the sale or exchange of “regulated payment stablecoins,” tokens pegged to the U.S. dollar and issued by approved entities, would not be considered taxable income.
This de minimis rule mirrors foreign currency exemptions and aims to encourage day-to-day crypto payments without triggering complex reporting obligations.
The bill also gives the Treasury Department the power to limit the exemption to prevent abuse or tax avoidance.
The draft also expands nonrecognition treatment to legitimate digital asset lending arrangements, extending existing securities loan rules under Section 1058. Only fungible, liquid digital assets such as Bitcoin (BTC) or Ether (ETH) would qualify.
This would exclude NFTs or synthetic instruments that could be used for tax manipulation.
Additionally, the legislation is closing a long-standing loophole in the wash sale rule.
A wash sale occurs when an investor sells an asset at a loss and then repurchases the same or a “substantially identical” asset within 30 days before or after the sale.
The IRS doesn’t allow the loss to be claimed for tax purposes because the investor hasn’t really changed their position, and they still own essentially the same investment. Instead, the disallowed loss is added to the cost basis of the newly bought stock. This means the loss can only be recognized later when the stock is sold for good.
This rule prevents investors from creating artificial tax losses while keeping their holdings.
However, wash trade rules do not yet include digital assets. Crypto traders can sell a token at a loss to reduce their taxable income, then instantly buy it back to keep their position. This loophole lets them harvest tax losses without truly changing their investments.
The new bill fixes that by adding digital assets to the wash sale rule. This would stop people from using quick crypto trades to create artificial tax write-offs.
The proposal further allows dealers and traders to elect mark-to-market accounting for actively traded digital assets, aligning crypto with securities treatment.
It also defines terms such as “digital asset exchange” and “digital asset” within the tax code, reducing ambiguity for investors and businesses.
If enacted, most provisions would take effect beginning with the 2026 tax year, giving the Treasury and the Internal Revenue Service time to draft accompanying regulations.
Related: Bitcoin Basics: ‘How You Use Crypto Is How You’re Taxed’
This story was originally published by TheStreet on Dec 21, 2025, where it first appeared in the Policy section. Add TheStreet as a Preferred Source by clicking here.
