Senator Lummis Introduces Crypto Tax Bill Aiming for $600 Million Revenue

Senator Cynthia Lummis of Wyoming has introduced a comprehensive digital asset tax legislation aimed at creating practical rules for cryptocurrency users while generating $600 million in federal revenue over the next decade. The bill addresses multiple taxation issues that have created compliance burdens for ordinary digital asset users. The legislation sets a $300 de minimis rule for digital asset transactions, consistent with foreign exchange regulations. This provision eliminates the tax reporting requirement for small buys such as buying coffee with Bitcoin, as long as transactions do not exceed the level or involve cash equivalents. The bill permits annual caps that limit total excluded gains to $5,000 per taxpayer, adjusted for inflation after 2026. Related transactions need to be aggregated under the draft rules to prevent abuse without diminishing the rules’ practical applicability to ordinary digital asset costs.

Mining and staking activities are deferred until taxpayers actually sell or dispose of the digital assets they have produced. This approach prevents situations where individuals owe taxes on volatile assets they haven’t liquidated and may struggle to convert to cash. Digital asset lending is treated similarly to securities lending under the proposed framework. Temporary lending arrangements won’t trigger immediate tax consequences, encouraging legitimate lending markets without creating artificial barriers to capital efficiency. The law extends wash sale provisions to virtual currency and closes a loophole that allowed cryptocurrency investors to use tax-loss harvesting techniques unavailable to investors in traditional securities. The 30-day rule will be applied uniformly across asset classes. Mark-to-market elections are offered to digital asset dealers and traders, on par with treatment given to securities and commodities professionals. Dealers are subject to mandatory application, while traders can adopt the treatment on a voluntary basis for actively traded digital assets.

Charitable contribution rules are modified to exclude actively traded digital assets from qualified appraisal rules. This change reduces donor administrative expenses when donating appreciated cryptocurrency to charity. The legislation terminates most provisions on December 31, 2035, establishing a sunset clause that allows for a future evaluation of the tax framework’s effectiveness. Implementation begins with transactions entered after December 31, 2025, providing transition time for taxpayers and tax professionals. Senator Lummis emphasized that archaic tax policies should not stifle American innovation in the digital economy. The bill aims to create common-sense rules that show how digital technologies function while maintaining appropriate tax compliance requirements.

Despite the introduction of this bill, the U.S. Senate passed a major budget bill without including Senator Lummis's proposed amendment for crypto-friendly tax reforms. The amendment aimed to provide significant relief for crypto users by waiving capital gains taxes on transactions under $300 and altering the tax treatment for staking and mining rewards. The proposed change would have taxed these rewards only upon their sale, rather than at the time of acquisition, addressing a key issue of double taxation for the industry. Despite lobbying efforts, the amendment was not included in the bill, which passed on a narrow 50-50 vote and now moves to the House of Representatives for further debate.

The failure of Senator Lummis's amendment to be included in the Senate's budget bill is a significant event for policy and compliance. However, the market's immediate price action indicates that these structural concerns are secondary to current sentiment. The cryptocurrency market demonstrated remarkable resilience, posting significant gains across the board despite this legislative setback. This suggests that traders are currently focused on broader macroeconomic tailwinds and bullish technical setups rather than this specific political development. The bill's provisions, if enacted, could potentially accelerate mainstream crypto adoption by easing capital gains tax burdens and providing clarity on the taxation of staking and mining rewards. This could lead to increased participation in the crypto ecosystem, as users would have greater confidence in the regulatory environment. However, the legislative battle will continue, likely returning to standalone bills, but the market has signaled that its current trajectory is not dependent on a favorable outcome from this specific vote.