Crypto Wash-Sale Ban Circulates Ahead of June 9 Hearing

Seven independent draft bills are circulating inside the U.S. House Ways and Means Committee ahead of a June 9 hearing on digital asset taxation. The proposals hit two open tax-code loopholes: the absence of wash sale rules for crypto and the lack of a de minimis exemption for routine payments. If the drafts advance, the changes would directly alter how stablecoin issuers, staking protocols, lending platforms, and retail holders report gains and losses.

The committee has not released the bill texts. Industry groups including the Blockchain Association and Coin Center have submitted comment letters. The June 9 hearing will include testimony from tax specialists and representatives from the digital asset sector.

The Wash Sale Mechanism and Crypto Tax-Loss Harvesting

Wash sale rules currently apply to securities and some commodities but not to cryptocurrency positions. A trader can sell a token at a loss and repurchase the same token immediately, booking a tax loss without changing economic exposure. The draft would extend the rule to all digital assets, including fungible tokens and non-fungible tokens (NFTs).

The mechanism is the same as for equities: a loss is disallowed if the taxpayer acquires a substantially identical asset within 30 days before or after the sale. The disallowed loss is added to the cost basis of the replacement asset, deferring the deduction to a future sale.

Risk to watch: The bill does not define "substantially identical" for digital assets. Two Ethereum-based stablecoins pegged to the dollar but issued by different protocols may or may not qualify. Until the committee provides a safe harbor or a list of fungible identifiers, tax planning for crypto losses carries execution risk.

Payment Exemption and the Stablecoin Adoption Signal

The second headline is a tax exemption for routine payment transactions using digital assets. Using a stablecoin to buy coffee triggers a taxable event if the stablecoin has appreciated relative to its acquisition cost. Even a one-cent gain is theoretically reportable. The draft would exempt gains below a threshold from gross income, aligning crypto payments with the foreign currency transaction exemption under IRC Section 988.

This exemption directly benefits stablecoin adoption for retail payments. If the threshold is set high enough to cover most consumer transactions, it removes the accounting burden for merchants and the reporting burden for individuals. The exemption likely does not cover staking rewards or lending interest, which remain ordinary income taxable at receipt. The committee is expected to clarify the boundary between payment transactions and investment activity.

Read-Through for Staking, Lending, and Exchange Platforms

Staking rewards are currently taxed as ordinary income on receipt at fair market value. If a staker receives 1 ETH as reward and immediately sells at a loss, the loss is deductible today. Under the wash sale rule, that loss deduction would be disallowed if the staker purchases ETH within 30 days. This creates a lockup effect: stakers who want to maintain their position may be forced to defer the loss.

Lending platforms face a different exposure. When a user lends crypto and receives a token representing the claim, the tax treatment of that claim is uncertain. The wash sale rule could apply if the lender sells the claim token at a loss and re-enters the lending pool within 30 days. Platform operators would need to track tax lots carefully, and custodial software would need to flag wash sales automatically.

The bills affect all centralized exchanges (Coinbase, Kraken, Binance.US) and decentralized lending protocols (Aave, Compound). Both types of platforms would need to adjust their tax reporting forms (1099-B) to account for disallowed losses. The cost impact falls on compliance systems, not revenue. No specific tickers are named in the drafts.

The Next Decision Point on Definitions and Effective Date

The committee will release the full text of the bills on June 8, one day before the hearing. That release will show whether the definition of "substantially identical" is narrow or broad. Two outcomes matter most: whether stablecoins, staking tokens, and lending receipts are all captured, and what effective date applies. Any transition relief for open positions would determine whether existing portfolios get grandfathered treatment.

For deeper context on how tax policy interacts with crypto market structure, see AlphaScala's crypto market analysis covering regulatory risk factors.