Congress is trying again to close a crypto tax loophole that lets investors claim losses on digital assets while instantly buying them back, skirting the usual wash sale rules that apply to stocks. The bill, H.R. 9172, introduced by Republican Representative Jodey Arrington, aims to bring cryptocurrency taxation in line with traditional securities by extending wash sale regulations to most digital assets.
Currently, cryptocurrencies are treated as property under U.S. tax law, allowing holders to exploit tax-loss harvesting strategies unavailable to stock investors. This change would restrict that by treating repurchases of the same or equivalent digital assets as wash sales, disallowing loss claims. The legislation also includes provisions to classify contracts, options, tokenized assets, and wrapped tokens as substantially identical for tax purposes, closing off numerous avoidance tactics.
The bill exempts certain qualified stablecoins issued under the GENIUS Act from these wash sale rules and excludes tokens earned through staking or mining to avoid penalizing those activities. Bipartisan support appears strong, with Republican Rep. Ron Estes backing the measure as a fair step to level the playing field between crypto and traditional financial assets. The Treasury estimates this could generate nearly $24 billion in additional tax revenue over the next decade.
Despite broad agreement, the bill's passage before the midterms remains uncertain. This effort builds on earlier initiatives supported by Democrats and the Biden administration that pushed for tighter crypto tax enforcement. As regulatory frameworks evolve, lawmakers seek to clarify legal definitions around digital asset categories, offering clarity in one of the industry's long-running grey zones.
This article is for informational purposes and does not constitute financial advice.
