Congress Proposes Digital Asset Tax Rules for Taxpayers and Brokers

The United States Congress introduced a legislative draft to clarify the taxation of digital assets for taxpayers, traders, and validators. The draft established comprehensive tax frameworks for stablecoins, staking, and digital asset lending.

The draft legislation provides that no gain or loss is recognized on the sale of a regulated payment stablecoin unless the taxpayer's basis is less than 99 percent of its redemption value. It also creates a safe harbor for trading digital assets through resident brokers or digital asset exchanges, provided the taxpayer is trading for their own account and is not a dealer in digital assets.

The bill extends existing securities lending tax treatments to eligible digital assets, ensuring that substitute payments made to lenders in lieu of staking rewards or transaction fees are included in gross income. Additionally, it applies wash sale rules and constructive sale rules to digital assets, preventing taxpayers from claiming losses on digital assets if substantially identical assets are purchased within a specific timeframe.

For passive validators, the legislation allows an election to defer the inclusion of newly created digital assets in gross income until their disposition, while capitalizing specified transaction costs. It also imposes strict substantiation and valuation requirements for charitable contributions of infrequently traded digital assets exceeding $500, limiting deductions to the gross proceeds if the donee organization sells the asset.

The relief and tax treatments outlined in the draft are subject to several conditions and time limits. The election for passive validators to defer income inclusion applies for the taxable year it is made and the four successive taxable years thereafter, unless revoked by the taxpayer. The wash sale restrictions apply if substantially identical assets are bought within a period beginning 30 days before and ending 30 days after the sale. Furthermore, the stablecoin tax exemptions do not apply to dealers or traders in securities, nor do they apply to transactions between related parties. Most provisions, including those for stablecoins and passive validation, are effective for taxable years beginning after December 31, 2025.