Bitcoin Policy Institute Voices Strong Opposition to PARITY Act

On Thursday, U.S. Representatives Max Miller (R-OH) and Steven Horsford (D-NV) published a bipartisan discussion draft bill titled the ‘‘Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Yields Act,’’ (Digital Asset PARITY Act), which seeks to define the tax code as it pertains to digital assets.

What's the Scoop?

• New Tax Clarity: The recently introduced Digital Asset PARITY Act seeks to further refine the Internal Revenue Code of 1986 with provisions that clarify the application of U.S. tax law on digital assets. Key bill provisions include:
  • Stablecoin Treatment: PARITY draft legislation aims to eliminate gains or losses on regulated payment stablecoin transactions, so long as the price paid per stablecoin does not deviate more than 1% away from its dollar peg.
  • Foreign Safe Harbor: PARITY would extend existing safe harbor provisions for foreign investors to digital assets, clarifying that digital assets trades conducted within the U.S. accounts of a foreign investor are not subject to U.S. tax jurisdiction.
  • Lending Treatment: PARITY would clarify that taxpayers should not recognize capital gains and losses when transfering digital assets under lending agreements, the same treatment that applies to securities.
  • Wash Trading Treatment: PARITY would extend wash trading prohibitions (currently only applicable to "stock or securities") to any digital asset.
  • Staking Tax Treatment: PARITY would allow for "passive stakers" to defer the tax consequences of income earned from digital asset staking.
• Open Opposition: The Bitcoin Policy Institute (BPI) is vocally opposing the staking tax provisions of PARITY, claiming it favors proof-of-stake crypto networks by failing to uphold technological neutrality in its application of regulation with respect to proof-of-work crypto networks, including Bitcoin.

What's the Scoop?

While BPI’s frustration is understandable it’s worth noting a key distinction: staking requires validators to commit capital in the form of locked digital assets, whereas PoW does not. That difference may explain the unclear rationale for PARITY's disparate treatment.