US House Draft Proposes Tax Safe Harbor for Some Stablecoin Transactions
Lawmakers just threw stablecoins a lifeline—and Wall Street's tax lawyers a curveball.
The Regulatory Shield
A new draft bill circulating in the House aims to carve out a safe harbor from certain tax rules for everyday stablecoin transactions. Think buying coffee or paying a friend, not speculative trading. The goal? To stop treating the dollar's digital shadow as a capital asset every time it moves.
Why This Matters
It’s a direct attempt to fix a glaring friction point. Under current law, using a stablecoin to, say, purchase a $5 sandwich could technically trigger a taxable event if the coin's value fluctuated a fraction of a cent between acquisition and spending. The proposal seeks to exempt these small-scale, functional payments from that reporting nightmare—recognizing them as a medium of exchange, not an investment.
The Fine Print & The Fight Ahead
Don't break out the champagne just yet. The draft is exactly that—a draft. It’s a starting point for what will be a fierce debate over thresholds, definitions, and which transactions truly qualify. The banking committees, the IRS, and crypto lobbyists will all want their say. It’s a step toward pragmatic clarity, but the path to law is littered with political landmines.
Bottom Line: Washington is finally trying to fit a square peg (crypto payments) into a round hole (the tax code), acknowledging that not every digital token move is a bet on the future. Of course, this creates a new cottage industry for accountants to define what 'some' transactions actually means—because in finance, the devil (and the billable hour) is always in the details.
US House Draft Would Exempt Small Stablecoin Payments From Capital Gains Tax
At its core, the bill WOULD exempt certain small stablecoin transactions from capital gains taxes. Under the proposal, purchases made with regulated, dollar-pegged stablecoins valued at less than $200 would not trigger taxable events.
The goal is to remove the compliance burden tied to routine payments, where even minor price fluctuations can currently require users to calculate gains or losses.
Horsford argued the draft is designed to provide clearer rules while preserving the integrity of the tax system.
To qualify, stablecoins must be issued by a permitted issuer under the GENIUS Act, be backed solely by the US dollar, and have traded within 1% of $1.00 for at least 95% of trading days over the past year.
Brokers and dealers would be excluded from the safe harbor, and the exemption would not apply to other cryptocurrencies such as Bitcoin or Ether.
Lawmakers also noted they are still evaluating whether to introduce an annual cap to prevent the provision from being used to shield investment activity rather than consumer payments.
BREAKING:
US HOUSE REPRESENTATIVES DRAFT BILL TO EXEMPT CRYPTO STABLECOIN TRANSACTIONS UNDER $200 FROM CAPITAL GAINS TAXES. pic.twitter.com/aOnS4yLezE
Beyond stablecoins, the draft attempts to resolve one of the most contentious issues in crypto tax policy: when staking and mining rewards should be taxed.
Current IRS guidance treats rewards as taxable income at the moment they are received, a position that has drawn criticism from industry advocates and some Republican lawmakers.
At the other end of the spectrum, Senator Cynthia Lummis has pushed for deferring taxes until rewards are sold.
The Miller-Horsford proposal takes a middle-ground approach. Taxpayers would be allowed to elect a five-year deferral on staking and mining rewards.
At the end of that period, the rewards would be taxed as ordinary income based on their fair market value. The draft describes the framework as a compromise between immediate taxation and full deferral until sale.
US House Draft Extends Securities Tax Rules to Crypto, Targets Wash Trades
The bill also extends several securities tax rules to digital assets.
It would apply wash sale restrictions to cryptocurrencies, limit strategies designed to lock in gains while delaying taxes, and extend securities lending treatment to qualifying crypto loans involving fungible, liquid assets. NFTs and illiquid tokens would be excluded.
Additional provisions would allow professional traders to use mark-to-market accounting and relax appraisal requirements for charitable donations of large-cap digital assets.
Passive protocol-level staking by investment funds would also be clarified as not constituting a trade or business.
The stablecoin SAFE harbor would take effect for taxable years beginning after December 31, 2025. Miller has said he believes the broader legislation could advance before August 2026.
