Congress Could Give Stablecoins a Tax Pass — Most Crypto Would Still Carry the Burden

Stablecoins face a possible tax shortcut, while other crypto may not — and that will matter to holders

Lawmakers are considering a de minimis tax exclusion for small crypto transactions, but a key consumer group says the carve-out looks narrowly written to apply only to dollar-pegged stablecoins. The Bitcoin Policy Institute’s staff have raised the alarm: if the language stays as-is, people who use stablecoins to move dollars around could get simpler tax treatment, while users of bitcoin and other tokens would still face full tax reporting on routine trades. For investors and crypto-focused funds, that split could change where trading happens and how costly everyday activity becomes.

How the proposal works in everyday terms — and who it actually helps

The bill being circulated in Senate offices would create a so-called de minimis exclusion in the tax code. Put simply, that is a rule saying very small transfers won’t trigger a taxable event. In the draft currently getting traction, the text appears to single out dollar-pegged stablecoins for that relief. That means swapping between two stablecoins or moving a stablecoin in and out of an exchange might not force you to report a gain or loss, while selling bitcoin or an altcoin would still be a taxable sale.

Senator Cynthia Lummis has been a leading sponsor of recent crypto tax changes and is connected to the measure as it moves through congressional channels. Supporters argue the carve-out will reduce paperwork for routine payments and micro-transactions, and will help stablecoins function more like bank deposits for day-to-day use. Critics — including the Bitcoin Policy Institute — worry the language is too narrow and would create a two-tier system that favors dollar-pegged tokens over other crypto assets.

At present, the bill is being discussed among lawmakers and is likely to move through the tax-writing and finance-focused offices that handle federal tax law. Staffers on both sides are weighing amendments that could broaden or tighten the exclusion before any committee vote.

What this could mean for markets, liquidity and trader behavior

If stablecoins gain a real, legally protected tax exemption for small transfers, expect quick and visible market shifts. Here are the likely, investor-facing effects:

• Trading and settlement may shift to stablecoins. Traders who want to avoid a lot of tax paperwork could route more activity through stablecoins. That would lift stablecoin volumes and could concentrate liquidity in pairs that touch the dollar peg, while spot markets for bitcoin and many tokens may see relatively less friction-free trading.
• Recordkeeping headaches remain for other crypto. Anyone who frequently trades non-stablecoin tokens would still face taxable events on sales and swaps. That increases bookkeeping and the practical cost of active trading.
• Exchanges could change fee and custody models. Platforms may nudge customers toward stablecoin rails, or build tools that make tax reporting easier for taxed assets. Some exchanges could offer preferential pricing for stablecoin-based trades to attract flow.
• Institutional flows could polarize. Funds seeking simple dollar exposure may lean more on stablecoins or spot fiat rails, while funds that want pure bitcoin exposure could face higher explicit tax costs, possibly influencing product design.

To illustrate: a retail trader who frequently rebalances between tokens might find rebalancing via a stablecoin cheaper in tax terms, leading them to favor stablecoins as an intermediate. Conversely, a long-term holder of bitcoin who rarely trades would be less affected day-to-day, but active market makers and short-term traders could see real cost differences.

Who’s talking — voices on the Hill and in the industry

The Bitcoin Policy Institute, represented publicly by staff including Conner Brown, has warned the proposal will give only limited relief and could create market distortions by privileging dollar-pegged coins. Supporters in Congress frame the move as common-sense simplification for payments and low-value transfers. Industry trade groups that represent stablecoin issuers and some exchanges have welcomed clarity around stablecoin tax treatment; other industry groups that represent a broader mix of crypto firms have pushed for a technology-neutral approach that would extend relief to non-dollar tokens as well.

Regulatory agencies such as the Treasury and the tax authority have not issued final guidance yet. Their eventual interpretations will matter a lot if the law passes in any form.

Practical steps investors should consider now

Given the high risk of change and the likelihood of messy implementation, crypto holders should act now to limit surprise tax costs. Helpful steps include:

• Keep precise records of dates, amounts and counterparty details for each trade and conversion. Good records make it far easier to calculate gains if and when they are due.
• Check the tax reporting tools your exchange or wallet offers. Platforms that export cost-basis information and trade histories will reduce the manual work.
• Consider whether shifting some day-to-day trading to stablecoins makes sense for your tax picture — but remember that any advantage depends on final law text and platform implementation.
• If you run a trading or market-making business, model scenarios that assume the de minimis applies only to stablecoins. That will show whether your workflow and pricing need to change.

Avoid locking into a single approach now; the details of the law and how the IRS interprets it could change the economics quickly.

What happens next and the likely timeline

The next weeks will focus on drafting and amendment. Expect committee staff to debate language, then a possible markup where lawmakers attempt to broaden the exclusion or close the stablecoin-only carve-out. The Treasury and tax officials could offer technical feedback before any final vote. Keep an eye on committee calendars for markups and for statements from bill sponsors — those are the milestones that will show whether the carve-out stays narrow, is widened, or is replaced by a different approach altogether.

For investors, the immediate reality is not a clear tax break but a period of uncertainty. That uncertainty alone will push some flows toward stablecoins and force active traders to rethink how they move in and out of positions.

Sources

• lummis.senate.gov
• cointelegraph.com
• cointelegraph.com
• cointelegraph.com
• cointelegraph.com