Bitcoin advocates are questioning the new bipartisan tax bill because the legislation punishes miners with harsh taxes.
Better known as the PARITY Act, the draft was shared by U.S. Representatives Max Miller and Steven Horsford. The aim is to reform the Internal Revenue Code and clarify the taxation of digital assets in the United States.
Why are cryptocurrency industry leaders against the PARITY Act?
However, the proposal has sparked discord within the broader cryptocurrency sector.
At the heart of the dispute is the draft's different approach to various blockchain consensus mechanisms. According to the draft, income derived from cryptocurrency mining is counted as gross income and taxed at fair market value when the funds are received.
Importantly, the legislation allows participants in proof-of-stake networks, such as Ethereum and Solana, to defer taxation until the moment the asset is sold.
Bitcoin operates, however, on a proof-of-work system that requires significant upfront investments in specialized equipment and continually increasing energy costs. In the current version of the PARITY Act, Bitcoin miners do not receive this tax transfer.
Conner Brown, CEO of the Bitcoin Policy Institute, noted that the draft maintains double taxation on Bitcoin mining but offers precisely targeted relief for staking. According to Brown, the proposed law randomly selects financial winners and losers.
“[The bill] creates a two-tier tax system, where stakers are granted deferral, but miners still face the same ‘imaginary income’ problem that both parties have noted requires a solution,” the Bitcoin Policy Institute commented.
The draft would also facilitate the use of certain stablecoins defined by the GENIUS Act in the taxation of everyday payments.
The Bitcoin Policy Institute noted that this complicates the use of Bitcoin for small retail purchases. These transactions may still incur capital gains reporting obligations, adding a tax burden to everyday spending.
“[In the draft] stablecoins are offered a $200 de minimis exemption, but not Bitcoin, even though Bitcoin alone accounts for 60% of the market value of all digital assets. This means that a coffee cup buyer using Bitcoin still has to calculate capital gains. The de minimis exemption for Bitcoin's everyday payments is essential as cryptocurrency matures into a global medium of exchange. Any legislation that truly aims for equality must include this,” the think tank added.
Industry experts emphasize the room for improvement.
While Bitcoin proponents oppose exemptions, broader industry advocacy groups are trying to leverage the draft as a starting point for wider reform.
Cody Carbone, CEO of The Digital Chamber, welcomed the PARITY Act but emphasized the need for extensive changes to prevent the industry from moving overseas.
“We are excited to see the bipartisan draft of the digital assets tax proposal. We have prioritized clarifying taxation throughout this congressional session – that’s why the publication of the draft is exciting for us, so we can truly influence the public discussion,” he stated.
Although he thinks it’s great that the discussion draft is finally public, the current version requires significant improvements.
In this context, Carbone presented several key changes that his organization demands. Among other things, the proposal that both staked and mined rewards would be taxed only upon sale or transfer of the asset, a broader de minimis exemption in addition to stablecoins, and the exemption of fundamental technical operations, such as transferring cryptocurrency to one's own wallet, from taxation.
He also called for simpler tax return forms to avoid overlapping reporting and clearer guidelines on lending and gifting digital assets.