Washington, D.C.— U.S. Senator Cynthia Lummis (R-WY) introduced comprehensive digital asset tax legislation that secures key victories for the digital asset industry and creates a level playing field for digital asset users across the country.
“In order to maintain our competitive edge, we must change our tax code to embrace our digital economy, not burden digital asset users,” said Lummis. “This groundbreaking legislation is fully paid-for, cuts through the bureaucratic red tape and establishes common-sense rules that reflect how digital technologies function in the real world. We cannot allow our archaic tax policies to stifle American innovation, and my legislation ensures Americans can participate in the digital economy without inadvertent tax violations.”
Senator Lummis said, “I welcome public comments on this legislation as we seek to get this package to the President’s desk.”
BACKGROUND:
Senator Lummis’ legislation addresses major digital asset taxation issues, including small transaction practicality (a $300 de minimis rule), ending the double taxation of digital asset miners and stakers, parity with other financial assets (digital asset lending, wash sales, mark-to-market tax treatment) and providing that charitable contributions do not require an appraisal. The legislation is estimated by the Congressional Joint Committee on Taxation to generate approximately $600 million in net revenue during the 2025-2034 budget window.
De Minimis Gain from Sale or Exchange of Digital Assets
Similar to foreign exchange, it creates a new Section 139J providing a de minimis exclusion for digital asset gains or losses unless the sale or exchange is for:
- Cash or cash equivalents (including payment stablecoins)
- Property used in active trade or business
- Property held for income production
Limitations:
- $300 threshold for both transaction value and total gain with $5,000 yearly total cap
- Aggregation rule for related transactions
- Inflation adjustment beginning 2026
This provision recognizes the impracticality of tracking every small digital asset transaction, such as buying coffee with Bitcoin, which creates enormous compliance burdens for ordinary users. The $300 threshold strikes a reasonable balance between tax compliance and practical usability of digital assets as a medium of exchange.
Tax Treatment of Digital Asset Lending Agreements
Expands Section 1058 securities lending rules to include digital assets:
- Digital asset lending agreements are generally not taxable events
- Appropriate basis adjustments required
- Income recognition rules for lenders
- Includes fixed-term transfers in ordinary course of business
This prevents the absurd result where temporarily lending digital assets would trigger immediate tax consequences, which would discourage legitimate lending markets and create artificial barriers to capital efficiency. The provision ensures digital assets receive the same sensible treatment as securities lending, which has operated successfully for decades without creating tax compliance nightmares.
Loss from Wash Sales of Digital Assets
Revises Section 1091 to cover “specified assets” (both securities and digital assets):
- 30-day wash sale rule applies to digital assets
- Covers options, forward contracts, futures, and derivatives
- Exceptions for dealers and business/hedging transactions
- Basis adjustment rules for disallowed losses
This closes an unfair loophole where digital asset investors could engage in tax-loss harvesting strategies unavailable to traditional securities investors, creating an artificial advantage that distorts investment decisions. The provision ensures tax neutrality between asset classes while maintaining appropriate exceptions for legitimate business activities.
Mark-to-Market Election
Creates new Section 475(g) allowing dealers and traders in digital assets to elect mark-to-market treatment:
- Dealers: mandatory application like securities dealers
- Traders: optional election like securities traders
- Limited to actively traded digital assets
This provides digital asset dealers and traders with the same tax treatment available to their securities and commodities counterparts, eliminating arbitrary discrimination based on asset type. The election allows for more accurate income recognition that matches the economic reality of trading businesses while maintaining consistency with existing tax policy.
Digital Asset Mining and Staking
Adds new Section 451(l) deferring income recognition:
- Mining and staking income not recognized until sale/disposition of produced assets
- Treated as ordinary income when recognized
This aligns the taxation of mining and staking rewards with the actual realization of economic benefit, rather than forcing recognition based on volatile and often uncertain fair market values at the time of receipt. The approach prevents cash flow problems where taxpayers owe taxes on assets they haven’t sold and may not be able to liquidate easily.
Charitable Contributions and Qualified Appraisals
Exempts actively traded digital assets from qualified appraisal requirements for charitable
contributions.
This removes an unnecessary bureaucratic barrier that has discouraged charitable giving of digital assets, even though these assets often have readily determinable fair market values through active trading. The provision encourages philanthropy while recognizing that actively traded digital assets should be treated similarly to publicly traded securities for valuation purposes.
Click here for full bill text.