U.S. bipartisan lawmakers draw up tax bill with stablecoin and staking relief

• A bipartisan bill in the U.S. House aims to modernize tax rules for digital assets, addressing issues like excessive taxation and tax abuse.
• The PARITY Act proposes tax exemptions for stablecoins, deferral options for staking rewards, and aligns digital assets with traditional securities.
• The bill includes measures to prevent tax loss harvesting in crypto and offers tax benefits to foreign investors trading through U.S. brokers.

A bipartisan duo in the U.S. House of Representatives is circulating a draft bill that would streamline tax rules for investors, traders and developers by explaining how they would handle reporting their taxes on staking, low value transactions and wash sales.

Representatives Max Miller of Ohio and Steven Horsford of Nevada unveiled the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Yields (PARITY) Act on December 20. The proposal aims to modernize the Internal Revenue Code of 1986 by eliminating excessive taxation on everyday crypto transactions, addressing “phantom income,” and closing gaps that lawmakers say invite tax abuse.

“America’s tax code has failed to keep pace with modern financial technology,” said Miller “This bipartisan legislation brings clarity, parity, fairness, and common sense to the taxation of digital assets. It protects consumers making everyday purchases, ensures the rules are clear for innovators and investors, and strengthens compliance so everyone plays by the same rules.”

The PARITY Act includes targeted tax exemptions for regulated stablecoins, optional tax deferral on staking and mining rewards and new rules aligning digital assets more closely with traditional securities and commodities. It would exempt capital gains tax on low-value stablecoin transactions under $200, provided the tokens are dollar-pegged, actively traded and issued by a federally regulated entity.

The bill would also apply longstanding wash sale rules to crypto, preventing traders from harvesting tax losses while keeping similar positions. Additionally, it proposes a mark-to-market accounting election for active digital asset traders, requiring annual recognition of gains and losses based on fair market value. A separate provision applies the “constructive sale” doctrine to crypto, targeting derivative-based hedging strategies that defer tax indefinitely.

Other measures include granting nonrecognition treatment to certain digital asset loans, excluding NFTs and thinly traded tokens, and extending tax benefits to foreign investors who trade crypto through U.S. brokers. While most provisions would take effect upon enactment, the stablecoin exemption would begin in tax years starting after Dec. 31, 2025.

“Today, even the smallest crypto transaction can trigger tax calculation while other areas of the law lack clarity and invite abuse,” said Horsford. “Our discussion draft of the Digital Asset PARITY Act takes a targeted approach that provides an even playing field for consumers and businesses alike to benefit from this new form of payment.”

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• Hong Kong is considering new rules to allow insurers to invest in digital assets, potentially boosting institutional crypto adoption in Asia.
• The proposal mandates a 100% risk charge on direct crypto holdings, requiring insurers to reserve a dollar for every dollar invested.
• Public consultation on the proposal will occur from February to April 2025, with legislative submissions expected later that year.

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