Congress Floats Tax-Free Stablecoin Spending and Delayed Taxes on Staking Rewards

U.S. lawmakers released a discussion draft that would ease tax reporting for everyday stablecoin payments while offering new flexibility for staking and mining rewards, according to a proposal circulated by Reps. Max Miller and Steven Horsford. The draft focuses on reducing compliance burdens tied to small transactions and addressing long-standing concerns around how digital asset rewards are taxed.

The proposal, titled as a discussion draft, does not yet represent final legislation. However, it outlines specific mechanisms lawmakers say are designed to better align crypto tax rules with how digital assets are used in practice. The text also signals that several technical elements remain under review before any formal introduction.

If advanced, the measures would mark one of the clearest attempts so far by Congress to narrow the tax gap between traditional payment tools and digital assets used for routine activity.

Stablecoin payments targeted for de minimis tax relief

The draft proposes a de minimis exemption for certain stablecoin transactions, meaning users would not have to calculate gains or losses for small payments. The threshold referenced in the explanatory language is $200 per transaction, mirroring an existing tax rule for foreign currency use.

However, the exemption applies only to what the bill calls “regulated payment stablecoins.” These are defined as U.S. dollar-pegged stablecoins that meet federal regulatory standards and demonstrate consistent price stability. The draft specifies that the stablecoin must have traded within 1% of $1 for at least 95% of the prior 12 months.

In addition, the taxpayer must have acquired the stablecoin within a narrow price band around $1. If a payment occurs when the stablecoin trades outside that range, the exemption would not apply. In those cases, the draft introduces a deemed $1 cost basis for calculating taxable gain or loss.

Lawmakers also flag potential guardrails. The discussion text notes that an annual aggregate cap and anti-abuse provisions are still under consideration. These would aim to prevent taxpayers from repeatedly splitting payments to stay under the transaction threshold.

Staking and mining rewards election addresses timing of income

The draft also tackles taxation of staking and mining rewards, an area that has drawn criticism for triggering income tax before assets are sold. Under the proposal, taxpayers could elect to defer recognizing staking or mining rewards for tax purposes.

The election would apply to activities defined as validating transactions on a cryptographically secured distributed ledger, including closely related processes. If the election is made, income recognition could be deferred until a set future point, described in the draft as up to the fifth taxable year after receipt.

When recognition occurs, the reward would be taxed as ordinary income based on its fair market value at that time. Afterward, the recognized amount would establish the asset’s tax basis, with later gains or losses treated under capital gains rules.

The draft requires annual reporting to the Internal Revenue Service for assets covered by the election. It also suggests limits for taxpayers using mark-to-market accounting, although those provisions remain bracketed and subject to revision.

Broader crypto tax framework still taking shape

Beyond stablecoins and staking, the discussion draft sketches a wider crypto tax framework. It includes concepts to extend wash sale restrictions to actively traded digital assets and explores nonrecognition treatment for certain digital asset lending arrangements.

Other sections address potential mark-to-market elections for digital asset dealers, constructive sale rules for crypto hedging strategies, and updated standards for charitable donations involving actively traded digital assets.

Because the document is labeled as a discussion draft, lawmakers stress that technical details may change. Still, the proposal signals growing momentum in Congress to tailor tax rules to how digital assets function in real-world use, particularly for payments and network participation.