By Joey Connor
ABA Viewpoint
Joey Connor is SVP for fiscal policy at ABA.
In recent weeks, significant attention on Capitol Hill has rightly been focused on the Clarity Act and efforts by members of Congress to establish the first-ever regulatory rules of the road for crypto companies.
Throughout the Clarity Act debate, ABA has stressed the importance of requiring crypto companies and other nonbanks to meet the same rigorous requirements as banks if they want to offer bank-like services. Not everyone on the other side has embraced that approach.
Now, as the Clarity Act debate moves to the Senate floor, Congress is turning to a new issue raised by digital assets — how to fairly tax crypto investments.
Once again, some of the initial ideas are not encouraging.
A proposal in the House for taxing digital assets would allow income earned from “staking” or “mining” cryptocurrency to go untaxed until an investor chooses to sell the earned crypto.
This would give one category of investment — cryptocurrencies — a significant advantage over nearly every other way Americans save, invest and earn returns today. The 83 percent of Americans not currently invested in crypto should be deeply concerned by this proposal.
A preferential rule for the same kind of income
When a company pays a dividend, shareholders receive the value of the dividend and pay tax that year. There is no option to defer that income to another year, or to pay tax on that income in another year.
The same is true for bank interest. When a consumer earns interest in a savings or checking account, that interest income is taxed annually on his or her tax return, even if the interest remains in the account and is never withdrawn.
The proposed treatment for staking and mining rewards under the House Ways and Means draft legislation, the Tax Clarity for Mining and Staking Act, would work very differently — and show clear favoritism for cryptocurrencies over other asset classes.
Specifically, the draft legislation would permit an investor who receives new cryptocurrency assets via staking or mining to elect not to include staking/mining rewards in gross income — and thus not owe tax on those rewards — until the investor sells or disposes of the underlying crypto asset.
This means crypto investors would have an indefinite election to choose when they pay their tax bill on staking or mining rewards.
Notably, this proposed tax treatment also would override existing tax guidance from the IRS — Rev. Rul. 2023-14 — which confirms that staking or mining rewards are taxable in the year they are received, at fair market value, once the taxpayer “gains dominion and control over the rewards.” This is the standard rule across the tax code: income is taxed when it is received and usable, not at the taxpayer’s election.
Shifting capital and distorting financial competition
Millions of Americans rely on savings accounts and certificates of deposit as straightforward, low-risk ways to earn a return. This interest is taxed on a current basis — every year — with no flexibility on timing.
Under the proposed Ways and Means rules, a crypto-based yield product could generate a similar economic return while allowing that earned income to compound without tax until the investor elects to sell the asset.
This deferral would clearly increase after-tax returns by reducing the drag on compounding accumulation in an uneven manner — but this change could also have broader economic implications that should matter to policymakers.
Bank deposits are not solely passive savings. They are the primary funding source for loans, small business investment, and economic growth. Banks also are subject to extensive regulatory obligations, like the Community Reinvestment Act, which ensures capital is reinvested back into local communities.
Legislative favoritism to reroute bank deposits toward tax‑advantaged, crypto-yield products could shift capital away from the banking system and directly hinder community lending, small businesses, and broader economic development. This is a risk we have separately highlighted in the debate over the Clarity Act, where interest-like incentives for holding stablecoins threaten to draw away bank deposits unless Congress strengthens the legislation.
A break from longstanding principles of tax neutrality
In addition to the substantial macroeconomic concerns that could result from the Ways and Means proposal, it also raises a familiar problem in tax policy: treating economically similar activities differently.
The tax code has been developed and refined over decades to ensure things like interest, dividends and other returns on capital are taxed on a current-year basis to maintain neutrality across financial products. Where differences exist, they are narrow and deliberate — not open-ended timing advantages.
The proposed legislation would depart from that framework by allowing income that has been earned, received, and which can be used essentially immediately, to be deferred indefinitely solely due to the type of the asset.
This is not an argument against digital assets, the need for clearer rules or parity amongst asset classes. Certainty is important, but it does not require creating a system where one type of yield can choose when to pay tax while others cannot. Parity is also important — though parity would mandate equality amongst similar financial products rather than clear favoritism towards one asset class.
At its core, the question is simple. If two investments generate similar returns, should one be taxed annually while the other is taxed only when the investor decides? Departing from the key principle of tax parity would not clarify the rules. It would tilt the playing field across the financial system with significant implications.
