Senator Lummis Proposes Groundbreaking Bill to Simplify Crypto Taxation in the U.S.
U.S. Senator Cynthia Lummis has introduced a significant piece of legislation aimed at reforming the taxation of digital assets in the United States, designed to alleviate the compliance burdens faced by users and businesses alike.
Filed on July 3, 2025, shortly after similar initiatives were excluded from the One Big Beautiful Bill Act, this standalone proposal seeks to update the Internal Revenue Code of 1986. Senator Lummis is championing this bill following the elimination of crypto tax provisions from the most recent federal budget.
In her words, “We cannot allow our archaic tax policies to stifle American innovation, and my legislation ensures Americans can participate in the digital economy without inadvertent tax violations.” This sentiment underscores the need for reform as cryptocurrencies become increasingly integral to the modern economy.
Key Provisions of the Bill
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Tax Exemptions on Small Transactions:
The proposed legislation introduces a de minimis exemption for transactions under US$300 (approximately AU$456), allowing small trades and capital gains to be tax-free, with an annual limit of US$5,000 (around AU$7,602). This measure is intended to reduce the compliance burden on everyday users engaged in minor purchases. Senator Lummis has stated that this threshold provides a sensible compromise between tax obligations and the practical use of digital assets for everyday transactions. -
Removal of Double Taxation:
The bill intends to eliminate double taxation on mining and staking rewards, changing the current framework where these rewards are taxed upon receipt. Instead, tax obligations would be deferred until the assets are sold, at which point the rewards would be classified as ordinary income. This change is expected to encourage participation in mining and staking within the digital asset ecosystem. - Tax Treatment for Crypto Lending and Donations:
The legislation aims to align the tax treatment of crypto lending and borrowing with traditional securities lending, affirming that these activities typically do not constitute taxable events. Additionally, charitable donations of digital assets would be exempt from taxes, addressing previous obstacles that discouraged philanthropy involving cryptocurrencies, despite their acknowledged market value.
Senator Lummis, who chairs the Senate’s subcommittee on digital assets, is actively seeking public input to expedite the bill’s advancement through Congress and ultimately secure President Trump’s endorsement.
Conclusion
Senator Lummis’ proposed legislation promises to modernise and simplify the tax landscape for digital assets in the U.S., aimed at fostering innovation and participation in the digital economy. By addressing the complexities of current tax policies, this bill could significantly enhance the usability of cryptocurrencies for everyday transactions and promote broader engagement in decentralised finance activities. The initiative represents a critical step towards a more inclusive regulatory framework that acknowledges the evolving nature of finance in the digital age.
