U.S. lawmakers from both parties have introduced a draft tax proposal aimed at updating how digital assets are treated under federal law, with specific relief measures for stablecoins and staking activity. The Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Yields Act, known as the PARITY Act, was circulated in the House of Representatives with the stated goal of aligning crypto taxation more closely with existing rules for traditional financial instruments. The proposal targets long standing concerns around excessive tax complexity for routine digital asset use, including small payments and onchain participation rewards. Lawmakers backing the bill argue that the current framework creates uncertainty for users and developers while allowing gaps that can be exploited for tax avoidance. By clarifying definitions and thresholds, the draft legislation seeks to reduce compliance friction without removing oversight, reflecting a broader shift in Washington toward integrating digital assets into the existing financial and regulatory system rather than treating them as a separate category.
A central feature of the bill is a capital gains exemption for certain low value stablecoin transactions, which would remove tax liability for payments under $200 when the stablecoin is dollar pegged, actively traded, and issued by a federally regulated entity. Supporters say this would allow stablecoins to function more like cash equivalents for everyday transactions, rather than taxable investment assets. The proposal also introduces optional deferral treatment for staking and mining rewards, allowing income recognition to be postponed for up to five years. This provision is designed to address what lawmakers describe as phantom income, where taxes are owed on tokens that may not yet be liquid or sold. In addition, the bill applies established wash sale rules to digital assets, limits tax loss harvesting strategies, and introduces a mark to market election for active traders who prefer annual recognition based on fair market value.
Beyond domestic investors, the draft legislation includes measures affecting market structure and cross border participation. It proposes extending certain tax benefits to foreign investors trading digital assets through U.S. brokers, a move intended to support liquidity while keeping activity within regulated channels. The bill also applies constructive sale rules to crypto derivatives and hedging strategies, targeting arrangements that defer tax indefinitely without reducing economic exposure. Nonrecognition treatment is proposed for specific digital asset loans, while exclusions apply to NFTs and thinly traded tokens to limit unintended consequences. Most provisions would take effect upon enactment, though the stablecoin payment exemption would apply to tax years beginning after December 31, 2025. While still at the discussion stage, the proposal signals growing bipartisan interest in resolving structural tax issues tied to digital settlement and blockchain based financial activity.
