U.S. Crypto Tax Bill Excludes Bitcoin from Proposed $200 Stablecoin Relief

itcoin Faces Setback in Major US Digital Asset Tax Overhaul

Bitcoin has once again entered the policy spotlight as US Representatives Max Miller and Steven Horsford released a discussion draft of the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Yields Act, also known as the Digital Asset PARITY Act.

The proposal outlines major changes to how digital assets are treated under the US tax code, with a focus on reducing uncertainty for investors and businesses.

The draft is a proposal for a change in the Internal Revenue Code of 1986, which will establish guidelines for digital assets.

These assets will be fungible tokens that are publicly priced for payments or value storage, excluding those related to ownership or debt, and will be on a blockchain system.

This is a draft, and it is awaiting feedback from lawmakers, industry stakeholders, and regulators. According to Digital Chamber CEO Cody Carbone, clear tax guidelines could bring crypto innovation back to the US.

Source: Digital Chamber

Stablecoin Tax Relief and Transaction Thresholds Take Center Stage

One of the most notable aspects of the draft is its treatment of stablecoins. It proposes that stablecoins pegged to the US dollar would not be subject to capital gains tax if their value does not deviate by more than 1% from $1.

The proposal also includes a de minimis rule for small transactions. Stablecoin payments under $200 would be exempt from reporting requirements and capital gains tax, though an aggregate limit for these exemptions has not yet been specified.

Additionally, fees incurred when acquiring or transferring regulated stablecoins would not be included in the cost basis, slightly altering how investors calculate their gains.

The draft also addresses income from staking, lending, and validator activities. Such income would be considered gross income and calculated using fair market value. It clarifies that passive staking is not considered a trade or business.

Bitcoin Exclusion and Wash Sale Rules Spark Debate

While stablecoins receive favorable treatment, Bitcoin is notably excluded from the proposed de minimis exemption. This omission has drawn criticism from industry advocates who argue that the original cryptocurrency should be afforded the same tax relief as stablecoins for small, everyday transactions.

The draft also proposes to extend the wash sale rule to digital assets. This rule, which currently applies to stocks and securities, prevents investors from claiming a tax loss on an asset if they repurchase a substantially identical asset within 30 days before or after the sale.

This would close a perceived loophole that some crypto traders have used to realize losses for tax purposes while maintaining their market position.

This draft is a significant step toward establishing a clear tax framework for digital assets in the US. However, the exclusion of Bitcoin from key provisions and the application of wash sale rules are likely to be points of contention as the proposal moves through the legislative process.

Also Read: US Government Shutdown Nears End: Bitcoin Price Recovers After House Approval

Disclaimer: The information provided in this article is for informational purposes only and should not be considered financial advice. The article does not offer sufficient information to make investment decisions, nor does it constitute an offer, recommendation, or solicitation to buy or sell any financial instrument. The content is the author’s opinion and does not reflect any view, suggestion, or advice of any kind. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The author, the publication, and its affiliates do not accept any liability for losses incurred by readers based on decisions made from the content. Cryptocurrency is not legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.