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US lawmakers have introduced draft legislation to modernize cryptocurrency taxation. The draft also aims to upgrade rules for stablecoin payments, mining rewards, staking income, and digital asset trading under federal tax law. The discussion draft, released by Max Miller and Steven Horsford, aims to align the tax code with current digital payment technology while maintaining enforcement standards.
The proposal focuses on regulated payment stablecoins and seeks to prevent small daily transactions from triggering complex tax reporting obligations for consumers and businesses across the United States. The lawmakers said the measure would create clarity and parity for taxpayers while giving innovators and investors defined rules within the existing tax framework.
At its core, the bill seeks to balance consumer use, market certainty, and compliance without rewriting the entire tax system for digital assets. Could this framework finally resolve long-standing uncertainty around everyday crypto payments?
The draft bill introduces a limited tax exemption for small, stablecoin-based payment transactions used for everyday purchases, provided that strict eligibility standards are met. Under the proposal, transactions under $200 would qualify only if an approved issuer issues the stablecoin and remains pegged solely to the US dollar.
The stablecoin must also trade within 1% of $1 for at least 95% of days during the previous year to ensure price stability. The exemption would exclude brokers and dealers and would not apply to other cryptocurrencies or investment-related transactions.
Lawmakers said they continue to review whether an annual cap should apply to prevent the exemption from shielding investment activity. In parallel, the bill clarifies source-of-income rules for digital asset trading to provide certainty for US and foreign participants while preserving strong enforcement standards.
The legislation addresses the taxation of mining and staking rewards, an issue that has divided Congress and created compliance challenges for taxpayers. Current Internal Revenue Service guidance treats mining and staking rewards as taxable income upon receipt.
That guidance was reaffirmed under the Joe Biden administration in October 2024. Earlier this year, Cynthia Lummis introduced legislation that would delay taxation until rewards are sold.
The Miller-Horsford proposal offers an alternative approach that allows taxpayers to elect a five-year deferral before tax applies. After the deferral period, the rewards would be taxed as ordinary income at fair market value, according to the draft text.
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Beyond payments and rewards, the draft extends several securities tax principles to digital assets to reduce regulatory gaps. The proposal applies wash-sale rules to cryptocurrencies, preventing investors from selling at a loss and then quickly repurchasing to claim deductions.
It also extends constructive sale rules that restrict strategies designed to lock in gains while delaying tax obligations. For digital asset lending, the bill would treat qualifying crypto loans as non-taxable events for fungible and liquid assets.
Non-fungible tokens and illiquid digital assets would remain excluded from this treatment. Professional traders could elect mark-to-market accounting, while large charitable donations of digital assets would not require qualified appraisals for assets with a market value exceeding $10 billion.
The proposed crypto tax framework has already started a debate over modernizing rules for stablecoin payments, trading, mining, and staking. The draft sets clear thresholds, clarifies income sourcing, and extends the scope of securities tax rules. Lawmakers continue reviewing caps and feedback before moving the proposal forward.
