The Digital Asset PARITY Act and the Tax Frictions It Removes

Key Takeaways:

• The Digital Asset PARITY Act applies existing securities and commodities tax rules to digital assets.

• The bill addresses phantom income, small transaction reporting, and lending tax treatment that have distorted behavior.

• Wash sale and constructive sale rules bring digital assets under familiar compliance standards.

• Clear tax rules increase the importance of accurate custody, reporting, and recordkeeping.

How current tax treatment fell out of sync

Digital assets developed outside the structure of the U.S. tax code. As usage expanded, tax treatment followed through a series of interpretations rather than a single framework. Over time, those interpretations became the default.

Small payments created capital gains events. Staking and mining produced taxable income before liquidity existed. Lending activity risked being treated as a sale. These outcomes were not intended, but they shaped how digital assets could be used.

In late December 2025, Representative Max Miller and Representative Steven Horsford introduced a bipartisan discussion draft intended to address those mismatches. The Digital Asset PARITY Act proposes to apply the same tax logic already used for securities and commodities to digital assets.

The bill does not create a new system, it fits digital assets into the existing one.

What the bill changes

The Act focuses on a narrow set of issues that have had outsized effects on behavior and adoption.

Small transactions

The bill introduces a $200 de minimis exemption for transactions conducted using regulated, dollar-pegged stablecoins. This removes the requirement to track cost basis for routine purchases.

Without the exemption, small transactions create disproportionate reporting overhead. With it, stablecoins can be used for everyday payments without turning routine activity into a tax reporting exercise.

Staking and mining rewards

Current interpretations can treat staking and mining rewards as taxable upon receipt, regardless of liquidity. The PARITY Act allows taxpayers to elect to defer taxation for up to five years.

At the end of the deferral period, rewards are taxed as ordinary income at fair market value. 

Digital asset lending

The bill extends existing securities lending tax treatment to digital assets. Bona fide lending and collateralization would no longer be treated as taxable dispositions.

For institutions, this determines whether digital assets can be used inside treasury, financing, and balance-sheet strategies that already exist elsewhere.

Wash sale and constructive sale rules

The Act formally applies wash sale and constructive sale rules to digital assets. This closes certain strategies and removes ambiguity around acceptable treatment.

Once applied, digital assets fall under the same internal controls, audit standards, and compliance reviews used for other financial instruments.

What changes operationally

These tax rules also help clarify operational expectations. 

Transaction histories must be reconciled across wallets and venues, and cost basis must persist through transfers and internal movements. Deferred income elections require records that remain accurate years later. Lending activity depends on clean ownership and collateral attribution.

These requirements already exist in traditional markets, the bill simply brings digital assets into that same operating model.

Why BitGo

As tax treatment converges with traditional finance, infrastructure determines whether firms can operate within the rules.

BitGo provides custody, treasury, and reporting systems designed for regulated digital asset operations. Its custody architecture and sub-ledgering capabilities support transaction attribution, cost basis continuity, and audit-ready records across complex portfolios. Treasury management tools support compliant collateralization and lending activity within a regulated, bankruptcy-remote structure.

As a national trust company operating under federal oversight, BitGo Bank and Trust N.A. aligns digital asset operations with the same fiduciary and compliance expectations applied to traditional financial institutions.

Frequently Asked Questions

Is the Digital Asset PARITY Act currently law?

No. It has been introduced as a bipartisan discussion draft and has not yet been enacted.

Does the $200 exemption apply to all crypto transactions?

No. It applies to small transactions conducted using regulated, dollar-pegged stablecoins.

How does staking reward deferral work?

Taxpayers may elect to defer taxation on staking and mining rewards for up to five years, after which rewards are taxed as ordinary income at fair market value.

Do wash sale rules apply immediately if the bill passes?

They would apply according to the effective dates defined in the final legislation.

Why does custody infrastructure matter under these rules?

Because compliance depends on accurate records, durable controls, and audit-ready reporting over time.