Market News

Lawmakers Propose New Tax Framework for Crypto, Including Stablecoin Safe Harbor: Bloomberg

Recently, two bipartisan House lawmakers, Rep. Max Miller and Rep. Steven Horsford, introduced a draft tax framework for digital assets known as the Digital Asset PARITY Act.

This legislation aims to create a safe harbor for transactions involving regulated, dollar-pegged stablecoins valued under $200, exempting them from capital gains taxes.

The goal is to alleviate compliance burdens for everyday cryptocurrency transactions, allowing consumers to make small purchases without worrying about tax implications.

To qualify for this safe harbor, stablecoins must meet specific requirements, including being issued by permitted entities and maintaining a stable value close to $1.00 for the majority of trading days.

In addition to the stablecoin provisions, the draft bill proposes a compromise on the taxation of staking rewards, allowing taxpayers the option to defer tax for up to five years.

This represents a middle ground in an ongoing debate about whether rewards should be taxed immediately or at the time of sale.

The framework also extends existing securities tax rules to digital assets, including provisions to prevent tax avoidance strategies through wash sales.

Responses from industry stakeholders highlight concerns about the evolving regulatory landscape, particularly regarding stablecoin yields and the impact on competition with traditional banking systems.

Over 125 crypto and fintech organizations, including the Blockchain Association, are pushing back against proposals to limit stablecoin reward mechanisms, asserting such restrictions favor traditional banks.

As these discussions unfold, the overarching objective remains to provide clarity and stability in the rapidly growing digital asset market, which is expected to significantly expand in the coming years.