U.S. Senator Cynthia Lummis is attempting to include a substantial crypto tax measure in the extensive budget bill supporting much of President Donald Trump’s agenda, aiming to mitigate tax implications arising from key cryptocurrency activities.
Lummis requested to incorporate language into Congress’ “Big Beautiful Bill” that would, among other initiatives, exempt taxes on small crypto transactions below $300, aiming to clarify a tax framework that currently penalizes individuals on both the investment and profit side of core activities such as staking and mining digital assets.
This proposal to make transactions tax-free (with a limit of $5,000 in total transactions annually) aims to alleviate the burden of calculating capital gains for those engaging minimally with digital assets, potentially encouraging hesitant individuals to explore crypto.
The amendment championed by Lummis, which has yet to be voted on, also seeks to resolve tax concerns related to crypto lending, wash sales, and charitable donations.
The Digital Chamber emphasized that this approach to mining and staking would correct a long-standing error in tax treatment. “Currently, staking and block rewards are taxed at both acquisition and sale points,” the U.S. cryptocurrency lobby indicated, urging constituents to advocate for Congress’s support. “Senator Lummis’ provision addresses this by taxing rewards only upon sale, aligning policy with actual income.”
Validators in a blockchain receive rewards for staking assets, giving returns for locking cryptocurrency. Current taxation occurs when they receive rewards and again when selling those assets. Industry advocates criticize this method, promoting a system that taxes assets solely upon eventual sale.
Crypto mining follows a similar principle, generating assets during the mining process for later sale. Assets obtained from airdrops and forks would receive identical tax treatment under Lummis’ amendment, being taxed only when sold.
This amendment might also close the wash-trading loophole that legislators have attempted to address for years. Current regulations allow crypto investors to utilize a “tax-loss harvesting” strategy by conducting tactical sales at a loss followed immediately by repurchases.
The Senate is engaging in a complex process known as “vote-a-rama,” with Lummis aiming to attach this amendment amid high stakes for Republican legislators regarding the sweeping bill. However, party leaders are encountering difficulties maintaining consensus as Democrats oppose it over potential reductions to Medicaid, green energy programs, and various elements of the comprehensive legislation.
The U.S. House barely passed its own iteration of the spending bill last month and would need to do so again if the Senate makes amendments. Analysis indicated that the provisions could contribute more than $3 trillion to the U.S. budget deficit.
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