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Cryptocurrency proponents hope to make 2026 the year of digital asset legislation, with tax and financial regulatory reform efforts ongoing. But whether those will become law or only serve as markers in longstanding debates over treatment of digital assets remains to be seen.
Two House members, Rep. Max Miller, R-Ohio, and Rep. Steven Horsford, D-Nev., introduced the latest bill to change the tax treatment of cryptocurrencies and other digital assets on Dec. 20. The draft legislation (PDF - 250.86 KB) would treat staking and mining rewards as income, allow for mark-to-market elections for digital asset traders and dealers, establish a $200 de minimis threshold for regulated payment stablecoins, eliminate current wash trading exemptions for cryptocurrency markets, and establish new tax treatment for digital asset lending, among other changes.
The bipartisan draft could influence legislation the House Ways and Means Committee has begun working on at the staff level, as both Miller and Horsford sit on that panel. However, there have been several efforts to change tax treatment of digital assets and cryptocurrencies over the past decade, with varying positions staked out by different members of Congress and industry groups.
The ongoing debate over definitions of digital assets — what should be considered a security versus a commodity — also impacts efforts to overhaul their tax treatment in the U.S. While the House already advanced bipartisan legislation to change the regulation of cryptocurrencies, a separate version of that legislation has been subject to intense lobbying in the Senate, where both the Agriculture and Banking Committees must debate and advance the legislation, due to the cross-jurisdictional nature of commodity and securities regulations.
The legislation must be bipartisan in order to reach the 60-vote threshold necessary to end debate on a bill in the Senate. But on Jan. 14 the Banking Committee postponed a debate and amendment meeting scheduled for the next day on that legislation, a sign that the bill likely did not have enough votes to advance at that time.
Grant Thornton insight:
While tax legislation is still possible without the financial regulatory effort, industry and Congress see market structure around cryptocurrencies and other digital assets as the current priority. For political and technical reasons, tax legislation is more likely to occur if a market structure bill appears to have enough momentum to become law. But several policy differences need to be resolved before that happens.
In a separate but connected development to ongoing congressional debates around cryptocurrency, the Treasury Department is also looking into additional guidance around rewards related to proof-of-stake blockchains. IRS Rev. Rul. 2023-14 currently treats staking rewards as income if the taxpayer gains dominion and control of the reward.
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