Senator Steve Daines, a Montana Republican, has circulated a 13-section draft bill that would overhaul digital asset taxation, exempting stablecoin payments and small network fees from gain-or-loss recognition while extending wash-sale rules to most cryptocurrencies.

The draft circulated the week of September 23–25, 2026, with formal introduction expected the following week. Its central provision creates a new Internal Revenue Code Section 1034 providing nonrecognition of gains or losses on qualifying stablecoin payments at or near the $1 mark. Under the proposed language, spending a dollar-pegged token that retains roughly its peg would no longer require logging a fractional-cent gain or loss. The rule would apply to transactions occurring after December 31, 2026.

A second relief measure targets transaction costs. Network fees of $10 or less per transaction would receive a de minimis exemption from gain or loss recognition, removing a reporting burden that currently applies to every on-chain fee payment.

Wash-Sale Extension Targets Loss Harvesting

The draft's most consequential change for active traders extends wash-sale rules to most digital assets, with qualified stablecoins carved out of the restriction. A wash sale occurs when an investor sells an asset at a loss, claims the loss for tax purposes, and immediately repurchases the same asset — preserving the position while reducing the tax bill. Equity investors have been subject to this restriction for decades; crypto holders have not.

The technical provisions include mark-to-market elections allowing certain taxpayers to treat holdings as if sold at fair value at year end, source rules clarifying where staking and mining income is considered earned, and safe harbors for foreign investors.

Alignment With House Legislation

Daines is not working alone. On September 16, 2026, the House Ways and Means Committee advanced the Digital Asset Tax Certainty Act, H.R. 10357, by a vote of 38-5. The Senate draft is structured to align with that House effort, reducing the friction of conference reconciliation if both chambers move.

Daines has signaled the push for months. In July 2026, he stressed the need for tax-code updates that reduce complexity, and the draft follows that theme.

The Property-Classification Root Cause

The compliance burden the bill addresses traces back to IRS Notice 2014-21, which classified digital assets as property rather than currency. That classification means every disposal — a trade, a purchase, or a fee payment — can trigger a gain or loss calculation. Stablecoins illustrate the problem most starkly: a token engineered to hold $1 can drift a fraction of a cent, and under current treatment that drift is technically reportable income or loss.

Operational Consequences

For payment processors, wallets, and merchants, the stablecoin and fee exemptions would remove much of the tax accounting friction that has slowed stablecoin adoption for everyday transactions in the United States. Brokers and exchanges, by contrast, would need to rework reporting systems to flag wash-sale events across digital asset classes, matching a compliance infrastructure that equities platforms already maintain.

The effective date limits near-term impact. Nothing changes for the current tax year even if the bill advances quickly, since the stablecoin provision applies only to transactions after December 31, 2026.

For traders, the wash-sale extension is the operative provision. Loss harvesting followed by immediate repurchase has been a legal strategy in crypto that equity investors never enjoyed, and its elimination would alter year-end tax management across the market. The final definition of "qualified stablecoins" exempted from the rule will determine how much of that strategy survives for pegged-asset positions.

Three variables will shape the outcome: the formal Senate introduction and any cosponsors who sign on, whether the Senate text diverges from H.R. 10357 on stablecoin definitions or the scope of the wash-sale restriction, and whether Senate leadership schedules a vote before or after November.