Along with the Clarity Act, the White House’s 2026 budget proposal targets a “wash sale” loophole that allows crypto traders to tax losses and then immediately buy back. This practice is illegal for stock investors, but is perfectly legal under current digital asset rules.
This proposal would apply wash sale rules to cryptocurrencies for the first time, thereby treating digital assets like traditional securities for tax purposes. It also includes a 30% consumption tax on electricity used in crypto mining via the Digital Asset Mining Energy (DAME) tax and FATCA reporting requirements for U.S. taxpayers who hold more than $50,000 in foreign crypto accounts.
- The White House’s 2026 budget proposes applying wash sale rules to cryptocurrencies to fill a loophole not available to stock traders.
- The Treasury estimates this change will generate $5.4 billion in revenue over 10 years.
- A 30% mining tax on electricity costs directly targets proof-of-work (PoW) operations.
- Expanding FATCA reporting to include foreign crypto accounts exceeding $50,000.
- The proposal faces a difficult legislative path in a Congress moving toward pro-crypto regulation.
What is the Wash Sale rule for?
Under current law, the wash sale rule prevents stock investors from claiming a tax loss if they repurchase the same or exactly identical security within 30 days. Since cryptocurrencies are classified as property and not securities, this rule does not currently apply to them.
Traders exploited this gap aggressively, selling their Bitcoin positions at a loss to take advantage of the tax deduction, then immediately buying back to preserve their investment. This is called “tax-loss harvesting” and it was perfectly legal for crypto holders.
The White House proposal fills this gap; If passed, cryptocurrencies will be subject to the same 30-day restriction imposed on stocks.
Does this proposal have a real path in Congress?
The political tension here is immediate; The same White House that is promoting the CLARITY Act as a crypto-friendly regulatory framework is also proposing strict tax rules. The White House does not see this as a contradiction and instead classifies the crypto tax proposal as a form of parity rather than punishment, but its impact on Capitol Hill appears different.
Congress is currently moving toward crypto-friendly legislation. The debate over the Clarity Act in the Senate Banking Committee has consumed much of the legislative effort, and this tax campaign runs counter to that momentum.
At the same time, the SEC is considering significant regulatory proposals, including an 85-provision rule change affecting the listing of Bitcoin and XRP ETFs, which would force crypto policy to move in multiple directions at once.
To put things in perspective, similar proposals for linen sales rules were put forward during the Obama and Biden administrations and never passed the halls of Congress.
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