Digital assets move closer to traditional financial tax treatment
Taxpayers that hold or transact in digital assets could encounter tax rules that more closely resemble those governing securities and other financial instruments if H.R. 10357 becomes law.
The Digital Asset Tax Certainty Act, passed by the House Ways and Means Committee on Sept. 16, would not redefine digital assets as securities for all legal purposes. Instead, it would incorporate numerous tax concepts that have historically applied to stocks, commodities and financial products.
For businesses, investors and fund managers, the proposal would provide additional statutory guidance in several areas while introducing new reporting and compliance obligations and planning considerations.
Impact of proposed legislation on common digital asset transactions
The bill proposes to apply tax rules associated with traditional securities and other financial instruments to certain digital asset transactions, both for anti-abuse and simplification purposes.
Wash-sale treatment: Under current law, investors were not expressly limited by section 1091 for loss harvesting transactions. The bill would extend wash-sale limitations to traded digital assets other than certain qualified stablecoins, aligning the timing of digital asset loss recognition more closely with the treatment of stocks and securities.
Mark-to-market availability: Dealers and traders in covered digital assets could elect mark-to-market tax treatment. This election could provide a more consistent framework for recognizing gains and losses and allow qualifying taxpayers to align their tax accounting more closely with the treatment available for traditional financial assets.
Investment company status: Traded digital assets would be taken into account when determining whether a corporation or partnership is treated as an investment company. Businesses contributing digital assets to an entity would need to evaluate whether the provision could affect eligibility for tax-deferred treatment.
The proposal also would expand rules involving constructive sales, digital asset lending agreements, straddles, futures contracts and certain charitable contributions.
Proposed tax treatment of U.S. dollar stablecoins
Qualified U.S. dollar-based stablecoins would receive separate treatment under several provisions of the bill. These separate tax rules are intended to reflect the economic reality that qualifying stablecoins, unlike other crypto digital assets, are designed to maintain a stable dollar value.
The bill would generally use redemption value to determine basis and gain or loss for qualifying U.S. dollar stablecoin transactions within specified value ranges and would define which stablecoins qualify for this treatment. It would also grant the U.S. Department of the Treasury authority in certain circumstances to treat qualifying stablecoins similarly to dollars for tax purposes.
Tax treatment of staking and mining income
The proposal would characterize income from digital asset validation-supporting activities as ordinary income. Further, the proposed bill would establish sourcing rules for income from staking, mining and similar digital asset validation activities. In general, the source of the income would depend on whether the taxpayer is a U.S. resident or nonresident, with separate treatment for income attributable to certain U.S. or foreign business operations.
The tax treatment of staking and mining activities has been the subject of IRS guidance and litigation, including a recent Tax Court decision (Paschall v. Commissioner, T.C. Memo 2026-46) that generally supported taxation when taxpayers have dominion and control over rewards. For businesses, funds and investors participating in digital asset validation activities, the proposal would provide greater certainty around how these activities are treated for federal tax purposes even as the industry may disagree with the proposed treatment.
The bill also would allow an investment trust to conduct specified staking activities without losing its trust status solely because it exercises those powers, provided the trust is not actively conducting a digital asset validation business.
Simplified digital asset accounting and broker reporting
The bill would ease certain reporting and accounting burdens associated with digital asset transactions.
Broker reporting changes: The proposal would exclude certain qualified U.S. dollar stablecoin transactions from digital asset broker reporting and would coordinate reporting with other relief provisions in the bill.
Accounting for widely traded digital assets: Taxpayers could elect to recognize aggregate gains and losses by designated asset type rather than calculate gain or loss exclusively on a transaction-by-transaction basis. Gains and losses under this method would be treated as short-term capital gains or losses. The election could reduce lot-level basis tracking, although taxpayers would need to evaluate the method’s tax consequences and election requirements.
De minimis digital asset fees: The bill would provide nonrecognition treatment for qualifying network and transaction fees of no more than $10. Corresponding broker rules would generally replace transaction-level reporting with aggregate reporting prescribed by Treasury.
Digital asset voluntary disclosure program and penalty relief
The proposal would direct Treasury to establish a Digital Asset Voluntary Disclosure Program within 12 months of enactment. Eligible taxpayers could use the program to correct certain prior digital asset tax violations by filing amended returns, paying the resulting tax and interest, satisfying the applicable program penalty and meeting other requirements established by Treasury.
Taxpayers who complete the program requirements could receive relief from specified civil penalties. Certain participants also could receive protection against the use of properly disclosed information for specified criminal referrals or prosecutions. Eligibility, penalty rates and available protections would depend on the taxpayer’s circumstances and certifications.
What businesses can do before digital asset tax rules change
Although Congress is expected to be in recess until after the November midterm elections, the proposal approved by the Ways and Means Committee indicates the direction of congressional tax policy for digital assets.
Taxpayers with digital asset exposure may benefit from reviewing current accounting methods, basis-tracking processes and loss-harvesting strategies against the types of rules contemplated in the bill.
Organizations that hold significant digital asset portfolios or engage in staking or mining activities may wish to assess where future operational changes could be required. Funds and active traders may wish to review wash-sale exposure and constructive-sale implications, as well as potential mark-to-market election opportunities.
In particular, businesses using stablecoins for treasury management, cross-border transfers or commercial transactions may want to monitor how Treasury indicates it would exercise its authority granted under the proposal in treating stablecoins similarly to standard dollars.
How your tax advisor can help assess digital asset tax changes
The proposed legislation would affect accounting methods, reporting obligations, investment activities, stablecoin transactions and international tax issues.
Because the provisions could interact differently with each taxpayer’s digital asset activity, taxpayers may want to evaluate the proposal against their current operations rather than consider each change in isolation. That evaluation may begin with the systems and processes used to track basis, calculate gains and losses, classify transaction fees and prepare tax reporting.
Businesses that operate across jurisdictions may have additional considerations involving state and local taxes, sourcing and global information reporting. Reviewing those connections could help organizations identify where the proposal would create new obligations, where it could simplify compliance and which tax elections or planning decisions may warrant further analysis.
