Senator Lummis Introduces Bill to Exempt Small Crypto Transactions from Taxation

US Senator Cynthia Lummis has introduced a draft bill aimed at reforming the tax code to exempt certain crypto transactions from taxation. The bill seeks to eliminate double taxation and provide clarity on the tax treatment of crypto staking, mining, and lending transactions. One of the key provisions in the bill is an exemption for crypto transactions and capital gains of $300 or less, with an annual cap of $5,000. Lummis emphasized that her legislation is designed to ensure that Americans can participate in the digital economy without inadvertently violating tax laws.

The bill also includes provisions to exempt crypto lending agreements and digital assets used in charitable contributions from taxation. This move is intended to remove bureaucratic hurdles that have discouraged charitable giving of digital assets, which often have readily determinable fair market values through active trading. Additionally, the bill introduces a new section stating that mining and staking income should not be recognized until the sale or disposition of produced assets and should be treated as ordinary income when recognized. This approach allows for the taxation of mining and staking rewards based on actual economic gain, rather than relying on the unstable and often uncertain fair market value at the time of receipt. This method helps investors avoid cash flow problems when they owe taxes on assets they haven’t sold and might not be able to quickly sell.

Lummis has also proposed that dealers and traders in digital assets be allowed to elect mark-to-market treatment, which would give them the same tax treatment as dealers and traders of stocks and commodities. This provision aims to stop unfair discrimination based on asset type and allows businesses to recognize income more accurately, aligning with how the economy actually works while staying in line with current tax policy. The bill is estimated to generate approximately $600 million in net revenue between 2025 and 2034, according to the Congressional Joint Committee on Taxation. This standalone draft bill represents Lummis’ best chance of passing pro-crypto legislation, following the Senate’s passage of a spending bill without addressing the crypto market.

Lummis, who was chosen to lead the Senate Banking Subcommittee on Digital Assets earlier this year, has been a strong advocate for crypto-related laws that would loosen regulations on the sector. She is one of the biggest supporters of setting up a US Bitcoin reserve through the Treasury. The new administration has shown a more crypto-friendly stance in 2025, increasing the likelihood that the bill could see support and approval from the Senate and House if it gains enough backing. Lummis is pushing to get the crypto tax bill approved by the Senate and sent to the House, and eventually to the President’s desk. She has welcomed public comments on the legislation as efforts continue to move the package forward.