2026 Crypto Tax Reforms Heat Up: Legislation Looms Amid Bipartisan Push and Industry Demands
By Staff Reporter
Washington, D.C. – As the cryptocurrency sector braces for transformative changes, experts predict a high likelihood of comprehensive tax legislation in 2026, driven by evolving policies under the Trump Administration and ongoing congressional discussions. The debate centers on treating crypto as a distinct asset class, easing capital gains burdens, and balancing innovation with anti-evasion measures.
Cryptocurrency taxation has long been a flashpoint, with the IRS classifying digital assets as property since a 2014 notice. This subjects investors to capital gains taxes on sales, workers to income taxes on earnings like staking rewards, and businesses to ordinary gains on transactions. Consumers face taxes even when spending crypto on goods, creating compliance hurdles that deter everyday use.[3]
Trump Administration Shifts Signal Legislative Momentum
A recent 166-page White Paper from the administration proposes recognizing cryptocurrency as a unique asset class, blending securities and commodities rules. This includes mark-to-market elections, securities lending provisions, and a trading safe harbor – measures that could generate revenue while offering taxpayer relief, echoing a 2022 bipartisan Senate bill.[1]
The White Paper also urges Treasury and IRS guidance on wrapping transactions, NFTs, digital asset losses, and staking in grantor trusts. In response, the IRS issued Revenue Procedure 2025-31, providing a safe harbor for grantor trusts staking assets without losing pass-through status.[1]
Analysts at Cadwalader forecast “2026 Crypto Tax Legislation: Hot with a High Chance,” citing a Discussion Draft with key provisions likely to advance. They highlight Trump-era changes, including potential rollbacks of DeFi regulations, and note congressional support.[1]
Industry Proposals Spark Controversy
A proposed Crypto Tax Framework, critiqued by Americans for Tax Fairness, aims to defer taxes on mining and staking income until sale – potentially years later – contrasting current rules taxing fair market value upon receipt. Critics argue this creates evasion schemes for the wealthy, subsidizing crypto over other assets.[2]
Other elements include a $5,000 annual exemption for transactions under $300, likened to foreign currency rules but unprecedented for labor income. Proponents say it enables small purchases like coffee; opponents warn it burdens compliance tracking and favors evaders.[2]
The framework also seeks R&D tax credits for crypto development and repeal of IRC 6050I reporting for large transactions over $10,000, which mandates sender details to combat money laundering. Detractors call this a direct assault on a 2021 anti-evasion law.[2]
Cato Institute Advocates Reform Over Regulation
The Cato Institute, a leading libertarian think tank, urges reforms to the Bank Secrecy Act (BSA) and capital gains taxes. At a recent Bitcoin Policy Summit, speakers lambasted capital gains rules for discouraging crypto purchases: users must calculate and report gains per transaction, unlike simple sales tax.[4]
Senator Cynthia Lummis (R-WY) is pushing for an exemption on purchases under an unspecified threshold in reconciliation legislation, though Treasury insists on annual caps. Cato argues for full elimination for goods and services, not cash-outs, to boost usability.[4]
Cato also opposes Treasury’s potential adoption of the OECD’s Crypto-Asset Reporting Framework (CARF), labeling it a “global surveillance fragnet.” This would compel exchanges to share user data with over 80 foreign governments, bypassing Congress and risking privacy in authoritarian regimes.[5]
U.S. exchanges already comply with BSA as financial institutions, filing suspicious activity and transaction reports, plus new Form 1099-DA for brokers. Cato warns against layering weaker OECD rules atop these.[5]
Classification Conundrum and Global Implications
Unresolved questions persist on crypto’s tax status: SEC views many as securities, CFTC as commodities. Congress could mediate by creating a new class, as Trump recommends.[3]
Cross-border transactions complicate sourcing: U.S. taxpayers risk double taxation or avoidance via offshore shifts. The GENIUS Act of 2025 mandates stablecoins be backed by cash or Treasuries, adding regulatory layers.[6]
Staking the Future: Innovation vs. Enforcement
Pro-reform voices, including Coinbase’s Faryar Shirzad, emphasize capital gains as a barrier to adoption. Narrowing BSA to real threats and exempting small crypto spends could foster innovation without sacrificing crime-fighting.[4]
Yet enforcement hawks stress reporting: a new federal law imposes jail and fines for not disclosing large crypto providers’ identities.[8]
With 2026 tax filing season approaching, the landscape promises flux. IRS guidance, potential rollbacks, and legislation could redefine crypto’s role in finance. Market participants are advised to monitor developments closely, as bipartisan momentum builds toward a framework balancing growth and fairness.
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