US Lawmakers Propose Crypto Tax Relief for Small Payments & Staking

The draft legislation introduces a targeted exemption from capital gains tax for stablecoin transactions valued at $200 or less. This provision is specifically designed for regulated payment stablecoins that are pegged to the U.S. dollar and issued by permitted entities under the proposed GENIUS Act. To qualify, a stablecoin must demonstrate consistent price stability, having traded within 1% of $1 for at least 95% of the preceding 12 months. According to the draft text, the explicit goal is “to eliminate low-value gain recognition arising from routine consumer payment use of regulated payment stablecoins.”

However, this exemption is narrowly crafted. It would not apply to brokers or dealers, and transactions would remain fully taxable if conducted when the stablecoin’s price falls outside the defined 1% stability band. In such cases, the proposal establishes a simplified deemed cost basis of $1 for calculating any capital gain or loss. The Treasury Department would retain authority to implement additional reporting requirements and anti-abuse rules to prevent exploitation of this new threshold.

Another major component of the draft addresses a critical pain point for the crypto community: the taxation of staking and mining rewards. Under current interpretations by the Internal Revenue Service, these rewards are often considered taxable income at the moment they are received by the taxpayer, regardless of whether they have been sold or converted to cash. The new proposal would allow taxpayers to elect to defer income recognition on such rewards for a period of up to five years.

At the end of the chosen deferral period, the rewards would be taxed as ordinary income based on their fair market value at that later date. The draft describes this provision as “a necessary compromise between immediate taxation upon dominion & control and full deferral until disposition.” This approach highlights the ongoing disagreement in Congress, where some House Republicans argue against taxing unrealized gains, while progressive Democrats maintain that staking rewards function like compensation and should be taxed when earned.

Beyond payments and rewards, the legislative draft seeks to harmonize the treatment of certain digital asset activities with long-established rules for securities. This includes applying wash sale rules—which prevent claiming a tax loss on a security if a substantially identical asset is repurchased within 30 days—to actively traded digital assets. Furthermore, the proposal would allow professional traders and dealers in digital assets to elect mark-to-market accounting, a method commonly used in securities trading.

The draft also proposes extending the favorable tax treatment typically applied to securities lending arrangements to specific digital asset lending transactions. These measures represent an effort to integrate aspects of the digital asset ecosystem into the existing financial regulatory and tax framework, providing clearer guidelines for market participants.

The discussion draft emerges amid a wider policy debate in Washington over the future of stablecoin regulation. The proposal’s focus on regulated payment stablecoins dovetails with ongoing congressional efforts to establish a federal framework for these digital assets. This legislative activity occurs against a backdrop of industry advocacy, as evidenced by a recent letter from the Blockchain Association to the Senate Banking Committee.

That letter, signed by over 125 crypto firms and industry groups, opposed separate proposals to restrict rewards on stablecoins held on third-party platforms. The industry group argued such limits would unfairly favor large incumbent financial institutions and stifle competition, drawing a direct comparison to the interest and rewards programs offered by traditional banks and credit card companies. The tax draft from Representatives Miller and Horsford can be seen as part of this larger conversation about creating a functional, competitive environment for digital assets within the U.S. financial system.