US PARITY Act Could Eliminate Capital Gains Friction on Regulated Stablecoin Payments
A bipartisan House bill would treat qualifying payment stablecoins as digital cash for tax purposes, removing the compliance burden that currently makes every USDC coffee purchase a reportable IRS event.
A bipartisan legislative push is advancing in Washington that could fundamentally reshape how the IRS treats everyday stablecoin transactions, exempting regulated dollar-pegged tokens from capital gains recognition and clearing a compliance barrier that has long hampered stablecoin adoption as a practical payment instrument. Representatives Max Miller (R-OH) and Steven Horsford (D-NV) formally reintroduced the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Yields (PARITY) Act in mid-April 2026, building on a discussion draft circulated on March 26 that significantly revised an earlier December 2025 version of the proposal.[1]
The Core Problem: Tax Friction on a $1 Token
Under current Internal Revenue Service guidance, stablecoins such as USDC and USDT are classified as digital assets and taxed as property. That classification means every disposal of a stablecoin, whether to buy a coffee, settle a payroll run, or send a cross-border remittance, is a taxable event requiring the holder to calculate and report any capital gain or loss between the acquisition price and the disposal price.[1] For a token designed to hold a $1.00 peg, the practical gain or loss on any single transaction is typically measured in fractions of a cent, but the reporting obligation exists regardless of magnitude.
The compliance cost compounds quickly at scale. A business paying a contractor in USDC generates a taxable event per payment. A merchant accepting USDC for retail sales faces a taxable event on receipt and again on any subsequent transfer. The IRS 1099-DA cost basis reporting regime, which began requiring basis tracking from digital asset brokers in January 2026, has made this burden even more concrete: every USDC transaction now feeds into a formal reporting chain that was previously theoretical for many small users.[1]
What the PARITY Act Would Change
The March 2026 version of the PARITY Act introduces a targeted carve-out under a new Tax Code Section 1034. For sales of qualifying stablecoins, no gain or loss would be recognized unless the taxpayer's basis in the token falls below 99 percent of its redemption value. Separately, exchanges of regulated payment stablecoins would carry a deemed $1 basis per unit, eliminating the need to track acquisition cost for routine payment transactions. Transaction costs would not increase basis under the new framework.[1]
For a stablecoin to qualify, it must meet three criteria: it must be issued by an entity authorized under the GENIUS Act framework; it must have traded within a $0.99 to $1.01 band for at least 95 percent of trading days over the preceding 12 months; and the taxpayer must have acquired the token within that same price band. The peg stability test effectively limits the tax benefit to tokens with demonstrated monetary-instrument-level stability, excluding volatile or experimental stablecoins from the exemption.[1]
The original December 2025 draft had referenced a flat $200 per-transaction de minimis threshold, mirroring the foreign currency transaction exemption under IRC Section 988. The March revision removed that dollar cap in favor of the basis-percentage test, which its sponsors argue is more technically precise and avoids creating an annual aggregate cap that would complicate accounting for high-volume users.
Comparison: Current Versus Proposed Treatment
Scenario — Current Treatment — Proposed Treatment
Buy coffee with USDC — Taxable event (capital gain or loss) — Exempt (no gain or loss recognized)
Cross-border remittance — Taxable event per transaction — Exempt for qualifying stablecoins
Business payroll in USDC — Each payment a taxable event — Treated as digital cash, deemed $1 basis
Merchant acceptance — Taxable on receipt and spending — Simplified reporting under Section 1034
GENIUS Act as the Regulatory Anchor
The timing of the PARITY Act is inseparable from the GENIUS Act, which was signed into law on July 18, 2025, establishing the first federal licensing framework for Permitted Payment Stablecoin Issuers (PPSIs). The GENIUS Act requires PPSIs to maintain 1:1 reserves in highly liquid assets, comply with Bank Secrecy Act anti-money-laundering obligations, and register with primary federal regulators. The Treasury Department and FinCEN issued a joint proposed rule on April 8, 2026, to implement the GENIUS Act's BSA requirements, deepening the regulatory infrastructure that the PARITY Act's tax exemption is designed to reward.[1]
By tying the tax carve-out explicitly to GENIUS Act compliance, the bill's sponsors create a two-tier stablecoin market: tokens from licensed issuers operating under federal oversight receive cash-equivalent tax treatment, while non-compliant or lightly regulated stablecoins remain subject to full property taxation. Circle's USDC, which operates under existing compliance frameworks consistent with GENIUS Act standards, is considered the primary near-term beneficiary of the new rules.
"This is bullish for USDC because reducing tax complexity removes a major barrier for merchants and users, paving the way for mainstream adoption as a practical digital dollar. Its existing compliance makes it the leading candidate to benefit." - CoinMarketCap CMC AI Dashboard, April 18, 2026 [1]
Industry Response and Legislative Outlook
Not all crypto industry stakeholders are supportive. The Bitcoin Policy Institute (BPI) has led a coalition opposing the stablecoin-only approach, arguing in letters to House Ways and Means Chairman Jason Smith and Senate Finance Chairman Mike Crapo that exempting stablecoins while leaving Bitcoin holders subject to full reporting obligations is neither technologically neutral nor equitable. BPI contends that the existing IRS rules are most burdensome for Bitcoin holders whose assets experience real price appreciation, not stablecoin users whose assets track a dollar peg by design. The institute has met with 19 congressional offices to press for a broader de minimis framework covering all digital assets.[1]
Representative Miller has described the PARITY Act as a work in progress and signaled openness to revision following feedback. The House Ways and Means Committee and the Senate Finance Committee are both working toward digital asset tax packages. Senator Cynthia Lummis (R-WY) continues to advocate for her standalone bill, which includes a $300 per-transaction threshold and extends de minimis relief to Bitcoin. Senator Steve Daines has pointed to an August 2026 target for comprehensive legislation.
For now, IRS property-tax treatment of stablecoins remains in effect, and no relief is available until Congress passes and the President signs final legislation. The PARITY Act remains a discussion draft advancing toward formal introduction, with its stablecoin-specific approach representing the closest Congress has come to treating digital dollars as functional cash equivalents under the tax code.
References
[1] CoinMarketCap CMC AI Dashboard - USDC Latest Updates (April 18, 2026): https://coinmarketcap.com/cmc-ai/usd-coin/latest-updates/