Bitcoin News Today: Lummis and Dorsey Push Bitcoin Tax Exemption, Critics Warn of Loopholes

Senator Cynthia Lummis (R-WY) and Jack Dorsey, co-founder of Block and former Twitter CEO, are advancing a proposal to exempt small Bitcoin transactions from capital gains taxes, aiming to facilitate everyday use of the cryptocurrency. The initiative, announced on October 8, 2025, follows Dorsey's public call for a "de minimis tax exemption" for minor crypto payments, which he emphasized during his company's rollout of Bitcoin payment tools and a new crypto wallet for small businesses. Lummis, a longstanding Bitcoin advocate, responded to Dorsey's appeal, stating she is "working on it" and encouraging public support for the legislation.

The proposed bill, part of Lummis's broader digital asset tax reform efforts, would exclude transactions under $300 from capital gains reporting, with an annual inflation-adjusted cap of $5,000 per taxpayer. This exemption mirrors how the IRS treats small foreign currency transactions and aims to align Bitcoin with fiat currency in everyday commerce. Under current IRS rules, even minor crypto purchases-such as buying coffee or groceries-trigger taxable events, creating a barrier to adoption as a medium of exchange. Lummis's legislation seeks to resolve this by simplifying compliance for consumers and merchants, reducing administrative burdens for small transactions.

The bill also addresses broader tax challenges in the crypto sector, including deferring income recognition for mining and staking rewards until assets are sold, expanding securities lending rules to cover digital assets, and allowing traders to elect mark-to-market accounting. These provisions aim to harmonize digital asset taxation with traditional financial instruments while addressing liquidity concerns for miners and stakers. The legislation, estimated to generate $600 million in net revenue from 2025 to 2034, includes sunset clauses for key provisions, expiring by December 31, 2035.

Reactions to the proposal are mixed. Supporters argue the exemption would accelerate Bitcoin's integration into daily commerce and reduce compliance costs for small users. Critics, however, question the narrow focus on Bitcoin and its potential to create preferential treatment over other cryptocurrencies like Litecoin or Dogecoin. Additionally, some analysts caution that the de minimis exemption could complicate enforcement and encourage tax evasion, particularly for thinly traded assets.

Lummis's efforts build on her earlier Digital Asset Tax Fairness Act and reflect growing bipartisan interest in clarifying crypto regulations. In July 2025, she introduced a standalone tax reform bill to modernize digital asset taxation, emphasizing the need to avoid "archaic" rules that stifle innovation. The legislation faces procedural hurdles but aligns with broader industry demands for regulatory certainty as Bitcoin approaches mainstream adoption.

[1] Senator Lummis Introduces Crypto Tax Bill with $300 Exemption and Mining Relief (https://coincentral.com/senator-lummis-introduces-crypto-tax-bill-with-300-exemption-and-mining-relief/)

[2] Lummis Unveils Digital Asset Tax Legislation (https://www.lummis.senate.gov/press-releases/lummis-unveils-digital-asset-tax-legislation/)

[3] "Working on It": Senator Lummis Backs Jack Dorsey's Push for a Bitcoin Tax Exemption (https://cryptonews.com/news/working-on-it-senator-lummis-backs-jack-dorseys-push-for-a-bitcoin-tax-exemption/)