US lawmakers are again pushing to amend tax rules for crypto assets, aiming to include digital assets such as Bitcoin and Ethereum under the "laundering rule." Under the current system, investors who directly hold crypto assets can quickly buy back similar assets after selling them at a loss, while continuing to claim tax deductions for the investment loss.
This arrangement differs from traditional financial assets such as stocks and bonds. With the latter, if the same or "substantially similar" securities are repurchased within 30 days before or after the sale, the loss is typically not eligible for tax deduction. Therefore, crypto assets have long been considered a unique loophole in US tax law.
Representatives raise bill again
Texas Republican Representative Jodey Arrington introduced a bill in June entitled "Applying Existing Tax Anti-Abuse Rules to Digital Assets Act." The core of the bill is to bring digital asset transactions under laundering rules, closing this current tax loophole.
The market's focus is on the fact that this push doesn't solely originate from the Democrats. Previously, the Biden administration and congressional Democrats attempted to advance similar arrangements during the pandemic. Now, with Republican lawmakers reintroducing the idea, some tax and legislative observers see it as a sign of growing bipartisan support.
In 2024, the U.S. Treasury Department estimated that extending laundering rules to digital assets could generate nearly $24 billion in additional revenue for the federal government over the next decade. This gives the relevant legislation a clear fiscal revenue-generating attribute in addition to its regulatory significance.
Current rules do not cover spot holdings.
The wash-out rule dates back to 1921 and aims to prevent investors from obtaining tax benefits by "selling to create losses and then quickly buying back" without changing their holdings.
The key reason why crypto assets are generally not subject to this rule is that the US federal tax system typically treats them as "property," not securities. Existing provisions are primarily designed for securities, and digital assets are not explicitly included.
This means that if investors directly hold Bitcoin or Ethereum, sell it after the price drops and quickly buy it back, they can usually still declare a capital loss to offset capital gains tax; if the loss exceeds the gain, it can also be offset against ordinary income within a certain amount, and the remaining loss can be carried forward to future years.
ETFs are already subject to existing rules.
The timing of the legislative amendments is also related to the decline in cryptocurrency prices over the past year. The report mentions that Bitcoin has fallen by about half since October 2025. With the price drop, more investors are experiencing paper losses, thus increasing the real value of exemptions from the wash-out rule.
However, not all crypto-related investors can utilize this space. If investors hold crypto funds such as Bitcoin ETFs, these products are typically subject to existing wash trading rules because they are securities. Those truly exempt primarily include wallets or spot positions directly holding crypto assets.
Even if the legislation is passed in the future, the rules may not necessarily mean that all crypto assets cannot be switched. According to tax experts, if two assets are not "substantially similar," an investor may not trigger restrictions by selling one asset and buying the other. For example, although Bitcoin and Ethereum are both crypto assets, their properties are not entirely the same.
Additional information:The report noted that the bill may not be passed before the US midterm elections in the short term, but it shows that Congress is paying increasing attention to the issue of crypto taxation.
