Legislators from the US House of Representatives have drafted a bill to simplify tax regulations for investors, traders, and developers in the digital asset space. The proposed legislation, known as the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Yields Act, was introduced by Representatives Max Miller and Steven Horsford on December 20. The bill seeks to update the Internal Revenue Code of 1986 to eliminate excessive taxation on everyday cryptocurrency transactions, address phantom income, and close loopholes that can be exploited for tax evasion.
According to Miller, the current tax code has failed to keep pace with modern financial technology, and this bipartisan legislation aims to bring clarity, fairness, and common sense to the taxation of digital assets. The PARITY Act includes provisions such as targeted tax exemptions for regulated stablecoins, optional tax deferral on staking and mining rewards, and new rules that align digital assets more closely with traditional securities and commodities. Specifically, it would exempt capital gains tax on low-value stablecoin transactions under $200, provided the tokens are dollar-pegged, actively traded, and issued by a federally regulated entity.
The bill also proposes to apply longstanding wash sale rules to cryptocurrency, preventing traders from harvesting tax losses while maintaining similar positions. Additionally, it suggests a mark-to-market accounting election for active digital asset traders, requiring annual recognition of gains and losses based on fair market value.
Other measures include granting nonrecognition treatment to certain digital asset loans, excluding non-fungible tokens and thinly traded tokens, and extending tax benefits to foreign investors who trade cryptocurrency through US brokers. While most provisions would take effect immediately, the stablecoin exemption would begin in tax years starting after December 31, 2025.
As Horsford noted, even small cryptocurrency transactions can trigger tax calculations, and other areas of the law lack clarity, inviting abuse. The proposed Digital Asset PARITY Act takes a targeted approach to provide an even playing field for consumers and businesses alike to benefit from this new form of payment.