Key Takeaways
- One section of the draft introduces an exemption from capital gains tax for stablecoin transactions valued at USD200 or less.
- According to the draft, the goal is “to eliminate low-value gain recognition arising from routine consumer payment use of regulated payment stablecoins.”
In a major regulatory development, a new discussion draft circulating in the US House of Representatives proposes changes to how crypto users are taxed, with a focus on small stablecoin payments and income generated through staking and mining.
The draft, put forward by Representatives Max Miller of Ohio and Steven Horsford of Nevada, seeks to modify the Internal Revenue Code to reflect the growing use of digital assets in everyday transactions. Lawmakers backing the proposal say current tax rules treat routine crypto use as taxable investment activity, creating compliance burdens for users making small payments.
One section of the draft introduces an exemption from capital gains tax for stablecoin transactions valued at USD200 or less. The relief would apply only to regulated payment stablecoins that are pegged to the US dollar, issued by permitted issuers under the GENIUS Act, and demonstrate consistent price stability. To qualify, a stablecoin must have traded within 1% of USD1 for at least 95% of the previous 12 months.
According to the draft, the goal behind the proposed legislation is “to eliminate low-value gain recognition arising from routine consumer payment use of regulated payment stablecoins.”
However, the exemption is limited in scope. It would not apply to brokers or dealers, and transactions conducted when a stablecoin trades outside a defined price range would remain taxable. In such cases, the proposal sets a deemed cost basis of USD1 for calculating gains or losses. The Treasury Department would retain authority to impose additional reporting requirements and anti-abuse rules.
Another major component of the draft addresses taxation of staking and mining rewards. Under existing interpretations, rewards may be taxed at the time they are received, even if they have not been sold.
The proposal would allow taxpayers to choose to delay income recognition on such rewards for up to five years. Once the deferral period ends, the rewards would be taxed as ordinary income based on their fair market value at that time.
“This provision is intended to reflect a necessary compromise between immediate taxation upon dominion & control and full deferral until disposition,” the draft said.
The approach highlights ongoing disagreements in Congress. Some House Republicans argue that immediate taxation results in taxes being imposed before any real economic gain is realized.
Progressive Democrats, by contrast, maintain that staking and mining rewards function like compensation and should be taxed when earned. The draft’s deferral option attempts to bridge those positions.
Beyond payments and rewards, the proposal would extend several tax rules traditionally applied to securities to certain crypto activities. These include applying wash sale rules to actively traded digital assets, allowing professional traders and dealers to elect mark-to-market accounting, and extending securities lending tax treatment to specific digital asset lending arrangements.
The draft emerges amid broader policy debate over stablecoins in the country. Last week, the Blockchain Association—a leading non-profit organisation in the digital asset space—sent a letter to the Senate Banking Committee, signed by over 125 crypto firms and industry groups, opposing proposals to restrict stablecoin rewards on third-party platforms.
The group argued that such limits would favor large incumbents and weaken competition, comparing crypto rewards to incentives offered by banks and credit card companies.
