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Congressional negotiations over a proposed crypto tax exemption may limit relief to stablecoin transactions only—excluding Bitcoin and other volatile digital assets—in a move critics say would undermine the policy’s core purpose of making cryptocurrency practical for everyday purchases.
The proposal would exempt small crypto transactions under $300 from capital gains reporting requirements, but limiting it to stablecoins that rarely fluctuate in value would offer minimal practical benefit while leaving Bitcoin users subject to the same tax-tracking burden that currently makes buying coffee with crypto impractical.
The potential restriction, disclosed this week by Bitcoin Policy Institute representatives who said they’re aware of discussions among lawmakers, has sparked warnings from crypto advocates who argue Congress is about to make a “severe mistake.”
“Limiting a de minimis exemption to stablecoins would be a severe mistake,” said Conner Brown, the institute’s head of strategy, in a post on X. “It would exclude ordinary Bitcoin payments from relief while favoring assets that rarely generate capital gains in the first place.”
The problem comes down to basic economics: stablecoins are designed to maintain a $1 peg, which means transactions almost never produce taxable gains.
Under current IRS rules, every crypto transaction—even a $5 coffee purchase—counts as a taxable event requiring users to calculate their cost basis, determine capital gains or losses, and report them to the IRS. This applies whether someone pays with Bitcoin, Ethereum, or a stablecoin like USDC.
The difference is that Bitcoin purchases typically do generate small capital gains because the asset fluctuates in value. If you bought Bitcoin at $50,000 and use it to buy coffee when it’s at $100,000, you’ve realized a gain on that portion—even if it’s only pennies.
Stablecoins, by contrast, remain at $1. Paying with USDC produces no gain to report, making a tax exemption largely meaningless for them.
“Stablecoins don’t change in value,” wrote Marty Bent, founder of media outlet Truth for the Commoner, questioning why they would need a small-gains exemption at all.
The proposed de minimis exemption would work similarly to how the IRS treats small foreign currency transactions. Purchases under $300 would be exempt from capital gains reporting, with an annual cap of roughly $5,000 in total tax-free gains.
Senator Cynthia Lummis of Wyoming introduced legislation in July proposing exactly this framework, along with exemptions for crypto donations to charities and tax deferrals for assets earned through mining or staking.
Lummis has long argued the exemption would make Bitcoin practical for daily use rather than forcing people to treat it purely as a long-term investment.
“Bitcoin was introduced as a peer-to-peer electronic cash system,” Lummis said when introducing her bill. “But transaction fees, slow settlement times, and tax obligations have pushed most users toward holding rather than spending it.”
The issue gained renewed attention in October when Block founder Jack Dorsey publicly pressed lawmakers to lift tax rules that make daily Bitcoin payments difficult. Lummis replied that she was working on the issue and urged supporters to make their voices heard.
The Bitcoin Policy Institute’s warning is based on what representatives say they’ve heard from lawmakers, but no Congressional members have publicly confirmed the restriction, and no legislative text has been released showing a stablecoin-only limitation.
In December, Representative Max Miller, who sits on the House Ways and Means Committee, said a draft bill on digital asset taxation has circulated among lawmakers and could advance before the August 2026 recess.
However, he did not specify whether the de minimis exemption would be limited to stablecoins.
BeInCrypto reached out to Senator Lummis’s office and the House Ways and Means Committee for comment on whether draft legislation limits the exemption to stablecoins but did not receive responses by publication time.
Congressional offices have not publicly explained the rationale for potentially limiting the exemption, but tax policy experts suggest several possible reasons.
First, stablecoins are increasingly viewed by regulators as payment tools similar to dollars, while Bitcoin is seen primarily as a speculative investment. Treasury officials may view facilitating stablecoin payments as more aligned with financial stability goals.
Second, the revenue implications differ significantly. Because Bitcoin transactions often generate taxable gains, exempting them would reduce tax collections. Exempting stablecoins—which rarely produce gains—costs the Treasury virtually nothing.
Third, there may be administrative concerns about tracking cost basis for volatile assets, though modern exchange platforms already maintain this data for users.
The debate comes as the IRS prepares to implement new reporting requirements in 2026, including 1099-DA forms from centralized exchanges that will give tax authorities much clearer visibility into crypto transactions.
Currently, many crypto users underreport or fail to report capital gains on small transactions, partly because tracking every coffee purchase is impractical. The new reporting requirements will make noncompliance much riskier.
If Congress passes a stablecoin-only exemption before these rules take effect, Bitcoin users would face a worst-case scenario: comprehensive IRS tracking of their transactions combined with no practical relief for small everyday purchases.
For Bitcoin advocates, the stakes extend beyond tax convenience. The original vision for Bitcoin was as “electronic cash”—a peer-to-peer payment system, not just a speculative investment.
If U.S. tax policy makes Bitcoin payments impractical while giving stablecoins a clear path, it could cement Bitcoin’s role as a store of value rather than a medium of exchange.
“The question,” said Brown of the Bitcoin Policy Institute, “is whether Congress wants to enable crypto payments or whether they’re comfortable with crypto remaining purely a speculative asset.”
Congress appears closer than it has been in years to passing some form of crypto tax legislation, with multiple committees actively working on digital asset frameworks.
Senator Lummis’s July proposal remains the most comprehensive bill addressing the de minimis exemption, but it’s unclear whether her broader approach will survive negotiations or whether a narrower stablecoin-focused version will emerge.
The House Ways and Means Committee, which has jurisdiction over tax policy, will likely be the key battleground. Any legislation would need to pass both chambers and receive presidential approval.
Meanwhile, the Bitcoin advocacy community is mobilizing to push for broader exemption language, arguing that limiting relief to stablecoins would be counterproductive and undermine the policy’s stated goals.
For now, crypto users face the same reality they have for years: every purchase, no matter how small, remains a taxable event requiring careful record-keeping and reporting.
