New Crypto Tax Bill Clarifies Exemptions, Lending, and Staking Rules

The proposed crypto tax legislation introduces clearer statutory language that frames certain exemptions as administrative actions rather than mechanisms designed to protect or enhance investment profits. Lawmakers emphasize that these provisions are intended to preserve tax integrity, not to create loopholes for capital gains. One key focus of the draft is the possibility of imposing an annual aggregate limitation, ensuring that repeated use of exclusions does not gradually erode overall tax collection. This reflects growing regulatory attention on how digital asset transactions interact with existing tax frameworks.

Regulators are expected to follow the bill with detailed rules and guidance to address potential abuse. These measures would likely include anti-abuse rules targeting transactions involving related individuals or entities, as well as coordinated arrangements engineered to generate multiple unintended exclusions from gross income. Additional guidance may introduce stricter recordkeeping and reporting obligations, along with clearer rules on allocating basis and characterizing appreciation when exclusions do not apply. The framework is also expected to address complex cross transactions involving goods and services to prevent inconsistent tax treatment.

Another major component of the draft focuses on digital asset lending and staking. The bill extends nonrecognition treatment to genuine lending of fungible and liquid digital assets, provided the lender has the right to receive identical property in return. This approach is carefully limited to avoid misuse, as lending transactions cannot operate as disguised sales or disposals. Treasury guidance would aim to prevent basis shifting, hidden sales, and other forms of crypto tax avoidance.

However, the lending provision excludes certain asset classes, including non-fungible tokens, illiquid or thinly traded tokens, tokenized securities, and synthetic or derivative-based instruments. This distinction highlights regulators’ intent to focus on assets that function more like traditional financial instruments.

The bill also addresses crypto tax compliance for mining and staking income. Mining and staking are defined as processes that validate transactions on encrypted shared ledgers. Taxpayers may have the option to defer recognition of mining or staking rewards, with the deferral lasting through the end of the fifth taxable year following receipt. Overall, the draft represents a significant step toward clearer, more consistent crypto tax rules that balance innovation with robust tax enforcement.