The new Digital Asset PARITY Act draft would extend wash-sale rules to digital assets while shielding certain regulated payment stablecoins from routine gain-or-loss recognition.
Congress has introduced the Digital Asset PARITY Act, a bipartisan discussion draft introduced by Reps. Steven Horsford and Max Miller, who would rewrite Section 1091 to cover “specified assets.”
The category explicitly includes actively traded digital assets and their derivatives, and carves out a narrow class of regulated payment stablecoins from routine gain-or-loss recognition.
The draft lands harder on the crackdown side than on the relief side, and that asymmetry is what gives the proposal its sharpest edge.
For years, crypto traders have exploited a gap that stock investors cannot touch. Under current law, wash-sale rules apply to “stock or securities,” a definition that excludes digital assets.
A trader could sell Bitcoin at a loss, buy back in the next day, and still claim the tax deduction, a maneuver the IRS explicitly bars in equity markets.
The PARITY Act draft closes that gap by rewriting Section 1091 to cover actively traded digital assets, notional principal contracts tied to them, and related derivatives, including options, forward contracts, futures contracts, and short positions.
The familiar 30-day-before-and-after replacement window applies, and the wash-sale changes take effect upon enactment.
| Topic | Current law | PARITY Act draft |
|---|---|---|
| Section 1091 applies to | Stock or securities | “Specified assets” |
| Digital assets covered? | No | Yes, if actively traded |
| Derivatives covered? | Not as crypto assets | Yes: options, forwards, futures, shorts, related contracts |
| Replacement window | 30 days before / after | Same |
| Effective date | Already in force for stocks | After enactment |
The stablecoin carveout
On the other side of the ledger, the draft says sellers recognize no gain or loss on the sale of a “Regulated Payment Stablecoin,” provided the transaction stays within a $0.99-$1.01 per-unit band.
When the exception applies, the taxpayer's basis in the stablecoin is deemed to be $1.00 per unit for calculating any residual gain or loss.
The carveout does not extend to brokers or dealers in securities or commodities, and related-party transactions carry explicit anti-abuse flags, though those guardrails sit under technical drafting review.
A stablecoin must be a payment stablecoin under the GENIUS framework, a permitted issuer must issue it, it must peg solely to the US dollar, it must trade within 1% of $1.00 on at least 95% of trading days in the preceding 12 months, and the taxpayer must acquire it within 1% of $1.00.
The stablecoin section takes effect for taxable years beginning after Dec. 31, 2025, and the draft's explanatory notes say that Congress is still working on whether to include a $200-per-transaction threshold and an aggregate annual limit in the final text.
That internal candor separates the stablecoin side from the wash-sale side, making the latter read like policy Congress has already decided.
The stablecoin carveout reflects the policy Congress wants, with Congress expecting Treasury to supply anti-abuse rules for coordinated arrangements but not yet embedding those guardrails in the black-letter text.
| Qualification factor | Draft requirement / treatment |
|---|---|
| Asset type | Must be a Regulated Payment Stablecoin |
| Regulatory status | Must qualify as a payment stablecoin under the GENIUS framework |
| Issuer | Must be issued by a permitted issuer |
| Peg | Must be pegged solely to the U.S. dollar |
| Trading stability test | Must trade within 1% of $1.00 on at least 95% of trading days in the prior 12 months |
| Acquisition test | Taxpayer must acquire it within 1% of $1.00 |
| Transaction price band | Sale/exchange must remain within $0.99–$1.01 per unit |
| Tax result if exception applies | No gain or loss recognized on sale |
| Basis treatment | Taxpayer’s basis is deemed to be $1.00 per unit for any residual gain/loss calculation |
| Excluded parties | Does not apply to brokers or dealers in securities or commodities |
| Anti-abuse guardrails | Related-party / coordinated-arrangement rules are flagged, but still under technical drafting review |
| Effective date | Applies to taxable years beginning after Dec. 31, 2025 |
| Open issue in draft | Congress is still considering a $200 per-transaction threshold and a possible annual aggregate limit |
The policy design
Congress is using the tax code to distinguish between “crypto as payment” and “crypto as trading.”
The stablecoin market now sits at roughly $316 billion, with transaction volume exceeding $34 trillion last year, and a Wharton/WEF analysis found that roughly 99% of stablecoin activity still involves digital asset trading rather than payments.
Congress is offering tax relief to the use case it wants to encourage, and writing new costs into the one it wants to constrain.
The wash-sale rule does not apply where the taxpayer applies mark-to-market accounting to the specified asset, and the draft separately creates a mark-to-market election for dealers and traders in digital assets.
The political loser, more specifically, is the ordinary taxpayer using spot crypto for tax-loss harvesting.
Sophisticated trading businesses may access a cleaner elections framework than the current law provides.
The IRS finalized broker reporting rules for digital asset sales, requiring Form 1099-DA for transactions from Jan. 1, 2025, onward, with brokers furnishing taxpayer copies by Feb. 17, 2026.
Most 2025 statements will not include cost basis, leaving taxpayers to calculate it themselves. This means Congress is debating anti-abuse reform at the exact moment retail crypto holders are experiencing standardized reporting for the first time.
The policy direction also reflects a broader consensus that predates the draft. The 2025 White House digital assets report recommended extending wash-sale rules to digital assets, while explicitly stating that those rules should not apply to payment stablecoins.
The 2025 Joint Committee on Taxation report identified the current wash-sale gap and the absence of any de minimis rule for routine digital asset spending.
The PARITY Act is Congress trying to codify a split that tax policy had already mapped.
Where it lands
In an optimistic outcome, lawmakers finalize the stablecoin language cleanly, align it closely with GENIUS definitions, and pair the wash-sale crackdown with a clear $ 200-per-transaction threshold that makes small payments genuinely friction-free.
In that outcome, the tax code accelerates the adoption of on-chain regulated dollars. Visa data show that more than 99% of the stablecoin supply is dollar-denominated, and leading issuers earned more than $7 billion in reserve interest.
If the OCC's projected issuer base under GENIUS fills out, the carveout covers a material share of dollar stablecoin volume. Crypto gains a cleaner payment rail and a more level trading framework at the same time.
For the worst-case scenario, the wash-sale, short-sale, and derivative coverage survive with little dilution while the stablecoin section stalls in technical review, never reaching a final clean text before the legislative calendar tightens.
The mark-to-market election benefits professionals who can navigate an elections framework, and retail investors lose the loophole fastest, with no offsetting simplification on the payments side.
The broader crypto legislation had hit a new impasse, with banks and crypto firms still fighting over stablecoin economics.
The PARITY Act, as a discussion draft with multiple sections explicitly flagged for ongoing technical work, sits directly inside that gridlock. Taxpayers enter the 2026 filing season under new 1099-DA reporting obligations, with Congress pointing toward reform without yet enacting it.
| Scenario | Wash-sale rules | Stablecoin carveout | Main winners | Main losers |
|---|---|---|---|---|
| Optimistic | Enacted largely as drafted | Finalized cleanly, possibly with clear $200 threshold | Regulated stablecoin users, compliant firms | Tax-loss harvesters |
| Worst case | Crackdown survives | Relief stalls in technical review | Professional traders using MTM elections | Retail crypto holders |
Congress is more certain about closing the loophole than about the final contours of the stablecoin carveout.
The wash-sale rewrite is the harder edge of the draft, as it is concrete, broadly scoped, and ready to move. The stablecoin relief is the softer edge, presenting itself as directionally clear, mechanically unfinished, and dependent on a regulated-issuer framework that the OCC is still building out.
The version of the bill that actually reaches a vote will reveal which coalition Congress found less uncomfortable to disappoint.