Crypto tax is hot on the Hill these days. In the interest of keeping policy discussions coherent, this post summarizes four separate proposals that crypto advocates often conflate and refer to, colloquially, as a "de minimis" proposal:

• Personal use de minimis.

• De minimis for gas.

• Stablecoin reporting.

• Stablecoin treatment.

PERSONAL USE DE MINIMIS. Bitcoiners have long advocated for a fixed dollar threshold below which dispositions of crypto in a personal transaction (e.g., beer at PubKey) would not give rise to capital gain. Legislative drafts for such a de minimis exemption would set the threshold at a $300 or $600 per-transaction face amount, with a $5,000 aggregate annual limit.

Reasonable minds can differ as to whether this (1) is good policy and (2) worth fighting for. On one hand, it seems silly to tax someone for buying beer with BTC. On the other, it’s unclear why a disposition of property for goods or services should be exempt from gain but not loss.

In an analogous context, FX dispositions in personal transactions do not give rise to taxable income if the amount recognized would be less than $200. That said, FX is taxed differently from BTC: all FX income is ordinary, and all FX personal losses are disallowed.

DE MINIMIS FOR GAS. Recently, some crypto folks have floated a de minimis exception for gas payments. While we haven’t seen that in draft legislative proposals, any such exception likely would apply to investment as well as personal transactions, and might not need an annual limit.

Side note: Even under current law, it is not clear that a disposition of gas that gets burned by the protocol (instead of paid to a validator) gives rise to taxable gain or loss. When I burn petrol that I bought at $3.00, I don’t recognize gain because it’s now worth $3.50.

Importantly, a de minimis exception for gas can coexist with one for personal transactions. That said, different groups might prioritize those exceptions differently. A de minimis rule for gas would be very helpful to the growing stablecoin space.

STABLECOIN REPORTING. Under current law, brokers generally have to report, on a 1099, exchanges of stablecoins for anything other than BTC, ETH, SOL, and other non-stablecoin crypto if the amount of those exchanges exceeds $10,000 for the year. Brokers want that rule gone.

1099 reporting is intended to provide taxpayers and the IRS with sufficient information to calculate taxable gain or loss. Because brokers treat 1 stablecoin as 1 dollar, their 1099s provide no relevant information—they are just a compliance burden.

STABLECOIN TREATMENT. Under current law, if you dispose of a stablecoin at a gain or loss, you need to report that gain or loss. Gain or loss is unlikely to occur offchain, because the merchant would denominate in USD, effectively agreeing to treat 1 stable as 1 dollar. But onchain, or in a world where merchants start denominating in USDC or USDT instead of USD, it’s a different story, and you might recognize a fraction of a penny of gain or loss on each purchase that add up to a relevant amount.

To avoid that result, one legislative proposal would treat, as zero, any gain or loss from a stablecoin you bought within 1 penny of the dollar. Interestingly, that proposal doesn’t turn off 1099 broker reporting for those transactions.

Another thought some commentators have is that stablecoins should just be deemed cash. That would tax stablecoin loans like cash loans (e.g., lenders would have to accrue deferred interest into income). It also would mean that section 6050I’s reporting rules would apply.

CONCLUSION. There’s a lot of crypto tax policy chatter on the Hill right now. It’s a great time to be a crypto tax lawyer. Likely, different market participants will advocate more strongly for different proposals. Unfortunately, different market participants also might use the same term ("de minimis") as shorthand for different proposals. I hope this article helps people avoid talking past each other.

Crypto tax is hot on the Hill these days. In the interest of keeping policy discussions coherent, this post summarizes four separate proposals that crypto advocates often conflate and refer to, colloquially, as a "de minimis" proposal:

• Personal use de minimis.

• De minimis for gas.

• Stablecoin reporting.

• Stablecoin treatment.

PERSONAL USE DE MINIMIS. Bitcoiners have long advocated for a fixed dollar threshold below which dispositions of crypto in a personal transaction (e.g., beer at PubKey) would not give rise to capital gain. Legislative drafts for such a de minimis exemption would set the threshold at a $300 or $600 per-transaction face amount, with a $5,000 aggregate annual limit.

Reasonable minds can differ as to whether this (1) is good policy and (2) worth fighting for. On one hand, it seems silly to tax someone for buying beer with BTC. On the other, it’s unclear why a disposition of property for goods or services should be exempt from gain but not loss.

In an analogous context, FX dispositions in personal transactions do not give rise to taxable income if the amount recognized would be less than $200. That said, FX is taxed differently from BTC: all FX income is ordinary, and all FX personal losses are disallowed.

DE MINIMIS FOR GAS. Recently, some crypto folks have floated a de minimis exception for gas payments. While we haven’t seen that in draft legislative proposals, any such exception likely would apply to investment as well as personal transactions, and might not need an annual limit.

Side note: Even under current law, it is not clear that a disposition of gas that gets burned by the protocol (instead of paid to a validator) gives rise to taxable gain or loss. When I burn petrol that I bought at $3.00, I don’t recognize gain because it’s now worth $3.50.

Importantly, a de minimis exception for gas can coexist with one for personal transactions. That said, different groups might prioritize those exceptions differently. A de minimis rule for gas would be very helpful to the growing stablecoin space.

STABLECOIN REPORTING. Under current law, brokers generally have to report, on a 1099, exchanges of stablecoins for anything other than BTC, ETH, SOL, and other non-stablecoin crypto if the amount of those exchanges exceeds $10,000 for the year. Brokers want that rule gone.

1099 reporting is intended to provide taxpayers and the IRS with sufficient information to calculate taxable gain or loss. Because brokers treat 1 stablecoin as 1 dollar, their 1099s provide no relevant information—they are just a compliance burden.

STABLECOIN TREATMENT. Under current law, if you dispose of a stablecoin at a gain or loss, you need to report that gain or loss. Gain or loss is unlikely to occur offchain, because the merchant would denominate in USD, effectively agreeing to treat 1 stable as 1 dollar. But onchain, or in a world where merchants start denominating in USDC or USDT instead of USD, it’s a different story, and you might recognize a fraction of a penny of gain or loss on each purchase that add up to a relevant amount.

To avoid that result, one legislative proposal would treat, as zero, any gain or loss from a stablecoin you bought within 1 penny of the dollar. Interestingly, that proposal doesn’t turn off 1099 broker reporting for those transactions.

Another thought some commentators have is that stablecoins should just be deemed cash. That would tax stablecoin loans like cash loans (e.g., lenders would have to accrue deferred interest into income). It also would mean that section 6050I’s reporting rules would apply.

CONCLUSION. There’s a lot of crypto tax policy chatter on the Hill right now. It’s a great time to be a crypto tax lawyer. Likely, different market participants will advocate more strongly for different proposals. Unfortunately, different market participants also might use the same term ("de minimis") as shorthand for different proposals. I hope this article helps people avoid talking past each other.