It’s a new year, and cryptocurrency taxation is again the talk of the Hill. At the end of 2025, Congressmen Steven Horsford (D-NV) and Max Miller (R-OH) introduced a bipartisan discussion draft (the “Discussion Draft”) with extensive cryptocurrency tax proposals. Separately, in the same week, multiple Republican House legislators sent a letter to the IRS criticizing Revenue Ruling 2023-14, which states that staking rewards are taxable upon receipt. The letter proposed taxing staking rewards only upon disposition, not receipt.

Given the recent buzz around cryptocurrency taxation, market participants should take stock of the current cryptocurrency tax landscape and recent trends. Below, we analyze cryptocurrency taxation under the Biden Administration and the evolving landscape under the Trump Administration. Then, we summarize the Discussion Draft in light of this evolving landscape, concluding that 2026 cryptocurrency tax legislation is very likely.

Crypto Tax under the Biden Administration

The Biden Administration’s approach to cryptocurrency taxation generally built upon Notice 2014-21, which provided initial guidance on the taxation of cryptocurrency, treating cryptocurrency as property, not currency, for tax purposes. The administration focused in large part on ensuring that taxpayers accurately reported their cryptocurrency income and on prosecuting underreporting of income (see here, here, and here).

Most notably, the Biden Administration enacted cryptocurrency broker reporting rules pursuant to the 2021 Infrastructure Investment and Jobs Act. By the end of 2024, Treasury finalized two sets of cryptocurrency broker reporting regulations, for custodial brokers and for decentralized finance (“DeFi”) transactions, the latter of which was widely criticized for being overly broad in scope. See here, here, here, and here.

The Biden Administration also proposed but could not enact various cryptocurrency tax proposals. Those proposals included a mix of taxpayer-favorable proposals, such as applying nonrecognition rules applicable to securities loans to cryptocurrency loans and allowing cryptocurrency dealers or traders to mark to market their gains and losses, as well as revenue-generating proposals, such as applying the wash sale rules to cryptocurrency and imposing a 30% excise tax on cryptocurrency mining.

Crypto Tax under the Trump Administration So Far

While the Trump Administration’s first term generally focused on enacting the OBBBA, which did not address cryptocurrency tax, cryptocurrency still remained a key policy focus.

In April, President Trump signed into law Public Law 119-5, which effectively nullified the DeFi broker reporting regulations, which were finalized during the Biden Administration (see here). Additionally, the IRS subsequently released FAQs clarifying that only businesses effecting sales transactions for customers, such as cryptocurrency ATMs, are subject to the broker reporting rules, and businesses providing custodial services, such as cryptocurrency wallet providers and software developers, are not. Taken together, these changes demonstrate a substantial pullback from the Biden Administration’s robust reporting rules.        

In August, the administration published a 166-page report (the “White Paper”) with various cryptocurrency tax and non-tax proposals. The White Paper requested tax legislation treating cryptocurrency as a distinct asset class, not just as property, that would be subject to rules similar to those for securities and commodities, including mark-to-market elections, securities lending rules, and the trading safe harbor. While the White Paper proposed some revenue-generating tax provisions like those advanced by the Biden Administration, it also proposed more taxpayer-favorable provisions, including ones previously proposed under a 2022 bipartisan Senate bill.

In addition to legislation, the White Paper also called on Treasury and the IRS to issue guidance on the tax treatment of wrapping transactions, non-fungible tokens, and losses on digital assets, as well as the tax implications for grantor trusts staking their cryptocurrency. As discussed here, following the publication of the White Paper, the IRS issued Revenue Procedure 2025-31, which provides a safe harbor that allows grantor trusts to stake digital assets without impacting their pass-through tax status.

In Congress, both the House Ways and Means Committee and the Senate Finance Committee held hearings on cryptocurrency taxation, as discussed here and here. The hearings suggest congressional support for enacting cryptocurrency tax legislation.

The Discussion Draft

The Discussion Draft incorporates many tax proposals from the White Paper. Although there have been prior cryptocurrency tax bills, most notably the 2022 Lummis-Gillibrand Responsible Financial Innovation Act, the Discussion Draft represents the first shot at addressing the various tax proposals set forth in the White Paper, which differ in various aspects from earlier legislative proposals.

The Discussion Draft’s key provisions include:

• Applying the wash sale rules to cryptocurrency. If enacted, cryptocurrency investors could not claim a loss if they sell cryptocurrency and repurchase substantially identical cryptocurrency within 30 days.
• Applying the securities lending rules to cryptocurrency lending. The Discussion Draft would clarify that lending cryptocurrency is not a taxable event.
• Expanding Commodity Trading Safe Harbor to include certain cryptocurrencies. The Discussion Draft would clarify that a non-U.S. investor trading cryptocurrency for its own account could rely on the Section 864(b) trading safe harbor, and therefore it would not be subject to U.S. net income taxation on that income.
• Permitting traders and dealers of cryptocurrency to mark to market their gains and losses. Similar to the existing rules for securities, cryptocurrency traders and dealers could elect to recognize gain or loss as ordinary income on publicly traded cryptocurrency based on its market value on the last day of the year.
• Exempting certain small stablecoin transactions from tax. The Discussion Draft would exempt from gross income up to $200 per transaction of gain or loss on “regulated payment stablecoins” pegged to the U.S. dollar, possibly subject to an overall annual limit. Notably, this proposal deviates from earlier legislative proposals (here and here), which provided de minimis exemptions for gain or loss on cryptocurrency broadly, and not just stablecoins, but limited those exemptions to individuals purchasing goods or services.
• Applying constructive sale rules to cryptocurrency. The Discussion Draft would apply the Section 1259 constructive sale rules to digital assets. As a result, investors could not use offsetting transactions, such as short sales and futures contracts, to lock in gains while deferring tax.
• Providing an elective deferral for income from staking and mining rewards. An electing taxpayer could defer income from the receipt of staking and mining rewards up to the earlier of five years after receipt or the date of disposition, as opposed to recognizing income upon receipt, which is the current IRS position. Electing taxpayers would include the fair market value of the staking and mining rewards on the date of recognition as ordinary income and receive an equivalent basis therein. If the rewards subsequently appreciated and the taxpayer sold the assets, it would then recognize a capital gain to the extent of the appreciation.
• Clarifying the charitable contribution rules for cryptocurrency. The Discussion Draft would provide that charitable contributions of certain “highly liquid digital assets” are not subject to an appraisal requirement.

Conclusion

Collectively, the Trump Administration’s recent cryptocurrency tax changes, together with the White Paper, suggest three insights for the upcoming year: (i) cryptocurrency tax legislation is likely and appears to have support in Congress; (ii) the IRS will likely issue new cryptocurrency tax guidance as called for by the White Paper; and (iii) there is a possibility that existing cryptocurrency tax rules may be rolled back, such as the DeFi regulations.

With regard to tax legislation, the Discussion Draft could form the basis for cryptocurrency tax legislation published later this year, especially in light of its incorporation of the White Paper’s various tax proposals, its bipartisan nature, and the current congressional focus on cryptocurrency tax legislation.  That said, the current Discussion Draft does not include full text for various proposals and likely faces twists and turns before it could become law.  Until then, taxpayers should monitor the status of the draft.

We will continue to track how the crypto tax forecast develops in Brass Tax.