Tax treatment of crypto assets under current rules now coming under fire. Common sense reforms such as enhancing consumer protection and national security measures would significantly improve the public acceptance of digital assets. The IRS currently classifies cryptocurrency as property, a classification that necessitates the reporting of every transaction, regardless of its size. This creates capital gains reporting obligations for even selling a small share of Bitcoin, like $10. By failing to provide a de minimis exemption for cryptocurrency transactions, the only people using it are speculative investors. This limitation prevents cryptocurrency from being used as a mainstream payment method.
The Push for a De Minimis Exemption
Several proposals aim to change this landscape. Crypto policy experts, including our own Ben Pham, have been pushing for the administration to set a $600 exemption for cryptocurrency transactions. This exemption was included in previous iterations of House and Senate bills including the Build Back Better Act. Its goal is to alleviate the burden of tax reporting on small transactions.
"The best time to plant a tree was 20 years ago. The second-best time is now." - Harrison Brooks
Such a change could encourage everyday use of cryptocurrencies for smaller purchases, potentially unlocking its full potential as a digital currency.
Senate Action on DeFi Broker Rule
In a move signaling a more accommodating stance towards the crypto industry, the Senate voted in March 2025 to repeal the controversial IRS DeFi broker rule. This rule had placed disproportionate and burdensome reporting requirements on decentralized exchanges (DEXs), making legal compliance nearly impossible for these platforms. Supporters of the repeal argue that it will reduce the regulatory burden on the global decentralized finance sector, allowing for innovation and growth. Combined with the proposed $600 exemption, this legislative step may help jumpstart adoption of cryptocurrency and decentralized technology even more.
Impact on NFTs and the Collectibles Tax Rate
The current tax structure is particularly problematic when it comes to the growing Non-Fungible Token (NFT) market. As it stands, NFTs are taxed at the prohibitively high rate of 28% due to their current classification as collectibles. This extreme tax rate can have a chilling effect on the angel investors and content creators you want. Providing an exemption for small cryptocurrency transactions would help make digital assets more appealing and accessible to everyday Americans. Even better, this would indirectly boost the NFT market. By lowering the barrier with cryptocurrency transactions within their platforms, this can ignite more participation in the NFT space. This, in turn, will foster greater creativity and innovation.
In fact, some critics argue that even a $600 threshold wouldn’t be a sustainable solution in the long run, largely because of inflation. They argue that the exemption amount would need periodic adjustments to maintain its relevance and effectiveness in promoting cryptocurrency adoption. Or, like the de minimis exemption, allow for intentional circumvention. This will go a long way toward ensuring that it is able to continue to serve its intended purpose and keep pace with rapidly rising economic conditions.
