U.S. House Advances Stablecoin Tax Safe Harbor and Staking Reward Deferral in Sweeping Crypto Tax Draft

Bipartisan proposal targets sub-$200 stablecoin payments, staking income timing, and alignment with traditional securities tax rules

TL;DR

• U.S. House draft proposes tax-free treatment for regulated stablecoin payments under $200 per transaction starting after Dec. 31, 2025.
• Optional five-year tax deferral introduced for staking and mining rewards to reduce “phantom income” exposure.
• Lawmakers aim to modernize crypto taxation as stablecoins gain relevance in payments, crypto price indices, and broader coin market cap dynamics.

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A bipartisan discussion draft released on December 21, 2025, by U.S. Representatives Max Miller of Ohio and Steven Horsford of Nevada lays out one of the most comprehensive attempts yet to modernize how digital assets are taxed in the United States, with a sharp focus on stablecoins and staking rewards. The proposal, informally referred to across policy circles as part of the Digital Asset PARITY Act framework, seeks to reduce compliance friction for everyday crypto users while tightening alignment with existing securities tax standards, reflecting how digital assets increasingly intersect with consumer payments, crypto price movements, and institutional markets tracked through crypto price indices.

Central to the draft is a de minimis tax safe harbor for stablecoin transactions valued at $200 or less per payment, which would exempt such transfers from capital gains recognition. The provision is designed to address a long-standing complaint that current tax rules treat even trivial stablecoin payments as taxable events, despite the fact that dollar-pegged stablecoins are engineered to maintain a stable crypto price near $1. Under the proposal, the exemption would apply only to regulated, U.S. dollar-backed stablecoins issued by permitted entities under the GENIUS Act framework, with eligibility further constrained by price stability requirements that generally require trading within 1% of the $1 peg for at least 95% of trading days over a 12-month period.

Lawmakers explicitly framed the measure as an effort to eliminate low-value gain recognition arising from routine consumer use of payment stablecoins, arguing that requiring users to calculate gains or losses on small, everyday transactions is impractical and inconsistent with how similar transactions are treated in foreign currency markets. The draft makes clear that the exemption would not extend to brokers, dealers, or speculative trading activity, nor would it apply to non-stable cryptocurrencies such as Bitcoin or Ether, whose price volatility remains a core feature reflected across crypto price indices and the broader coin market cap. Discussions referenced in the draft also acknowledge ongoing consideration of an annual aggregate cap to prevent abuse through transaction splitting, although no final threshold has been set.

Beyond payments, the proposal tackles one of the most debated issues in crypto taxation: the timing of income recognition for staking and mining rewards. Current IRS guidance generally treats such rewards as taxable upon receipt, even when recipients have not sold the assets or realized cash proceeds. The House draft introduces an elective option allowing taxpayers to defer recognition of staking or mining income for up to five years. Supporters characterize the approach as a compromise that reduces exposure to so-called phantom income while stopping short of full deferral until disposition, a structure intended to better reflect economic reality for long-term participants in proof-of-stake networks.

Additional provisions aim to harmonize digital asset taxation with existing securities law. The draft proposes extending wash sale rules to actively traded crypto assets, limiting the ability to harvest tax losses through rapid repurchases, while excluding illiquid tokens and non-fungible assets from those constraints. Professional traders would gain access to mark-to-market accounting, enabling annual recognition of unrealized gains and losses, a move that mirrors treatment available in traditional financial markets. The bill also clarifies that passive protocol-level staking conducted by investment funds would not, on its own, constitute a trade or business, a distinction viewed as critical for institutional participants navigating exposure tied to crypto price benchmarks and overall coin market cap trends.

The legislative push unfolds against a backdrop of repeated, failed efforts to introduce crypto-specific tax relief in previous Congresses. Earlier proposals, including a mid-2025 attempt featuring a higher per-transaction exemption paired with an annual cap, stalled amid broader tax negotiations. This time, sponsors argue that the rapid integration of stablecoins into payment rails, banking infrastructure, and digital commerce makes reform increasingly urgent. Industry observers note that stablecoins now underpin a growing share of on-chain settlement activity and indirectly influence crypto price discovery, even as regulators and banks debate their role in the financial system.

Political reactions highlighted in coverage of the draft underscore competing pressures shaping the bill. Supporters described the proposal as a consumer-focused update that provides clarity for innovators and taxpayers alike, while ensuring compliance standards remain intact. Critics from parts of the banking sector continue to argue that stablecoin rewards and yield mechanisms divert deposits from traditional institutions, though digital asset advocates counter that such positions reflect anti-competitive instincts rather than systemic risk concerns.

If enacted, the stablecoin safe harbor and staking deferral provisions would apply to taxable years beginning after December 31, 2025, marking a potential turning point in U.S. crypto tax policy. While the draft remains subject to revision, its scope signals a growing recognition in Congress that digital assets are no longer a niche market variable, but a structural component of payments, investment strategy, and price formation across the crypto industry.

This article has been refined and enhanced by ChatGPT.