S. 5616: Aligning Digital Assets with Principles of Taxation Act

This bill would update federal tax rules for digital assets, including cryptocurrencies, stablecoins, and related tokens. Its main purpose is to make the tax treatment of these assets more specific and consistent across a range of common activities such as buying, selling, mining, staking, trading, lending, and holding assets through partnerships or trusts.

Key tax changes for digital assets

• Stablecoins: Many purchases using qualifying stablecoins would be treated more like using cash, meaning the transaction would not trigger a taxable gain or loss in many cases. Some reporting requirements would also be reduced for these transactions.
• Small network fees: Certain small payments of network fees, such as blockchain transaction fees, would be exempt from some tax consequences.
• Staking and mining: The bill would set rules for when income from staking or mining is recognized and how it is sourced for tax purposes.
• Dealers and traders: Eligible digital asset dealers and traders would be allowed to use mark-to-market accounting, which generally means valuing assets at market price at year-end for tax purposes rather than waiting until sale.
• Wash sale and constructive sale rules: The bill would expand anti-tax-avoidance rules so that certain digital asset transactions are treated similarly to stock transactions under wash sale and constructive sale rules.
• Transfer and reporting rules: It would broaden reporting and transfer-related rules for digital assets, including how certain transfers are treated for tax purposes.
• Trusts and partnerships: The bill would clarify how digital assets are handled when held through trusts and partnerships.

Definitions and covered assets

The bill would create or expand definitions for terms used in digital asset tax law. It would also address the tax treatment of tokenized assets and bridged assets, which are digital representations of other assets or assets moved across blockchain networks.

Other tax rule updates

The legislation would apply digital asset rules to areas such as reporting, charitable deductions, partnership taxation, and certain anti-abuse rules. Some changes would take effect after 2026.

Relevant Companies

• None found