Daines' ADAPT Act would spare stablecoin purchases from gains tax, not Bitcoin
In brief
- Sen. Steve Daines released the proposed ADAPT Act on Sept. 30.
- Qualifying dollar stablecoin purchases would avoid gain-or-loss recognition under a new section 1034.
- Bitcoin spent at checkout would remain a taxable disposition.
- Network fees of $10 or less in aggregate would be exempt under a separate rule.
- Both provisions would apply starting Jan. 1, 2027, if enacted.
What the bill would change
The 56-page text, titled the Aligning Digital Assets with Principles of Taxation Act, lists Sens. Cynthia Lummis, Bernie Moreno and Tim Scott of South Carolina as cosponsors. Bloomberg Law reported on Sept. 25 that Daines had circulated a draft and expected to introduce it the following week, CryptoSlate noted.
Under current IRS guidance, paying for goods or services with digital assets in any amount is a disposition. The IRS's own example is tiny: a $5 Bitcoin purchase with an allocated basis of $3 produces a $2 capital gain that has to be reported.
The bill's new section 1034 would treat spending covered payment stablecoins on products or services as a nonrecognition event. It's narrow. Only gain or loss on the token itself is covered; sales taxes and other purchase obligations stay in place.
Who qualifies
A token has to be a qualified US dollar stablecoin issued by a permitted payment stablecoin issuer under the GENIUS Act (foreign issuers could qualify through OCC registration or a Treasury finding that their home regime is comparable). It must appear in Treasury's most recent report before the payment, and the taxpayer must have acquired it within 3% of $1.00. Treasury would publish that report at least every three months.
Traders, brokers and dealers in these stablecoins are excluded, as are taxpayers using a functional currency other than the dollar. Taxpayers would need records separating eligible payments from other transactions, while brokers wouldn't file information returns on covered payments and could rely on customer certifications for the 3% test.
Bitcoin keeps its paperwork
Section 1034 only covers stablecoins, so a Bitcoin payment at checkout remains a taxable disposition.
There's one carve-out. A new section 1044 would exempt coins used to pay transaction costs (base, gas and priority fees) when the aggregate value is $10 or less. On a Bitcoin purchase, the BTC paid as a network fee could qualify while the coins sent to the merchant wouldn't. Anyone who initiated more than 5,000 digital asset transactions in the prior taxable year is shut out of that exception, along with traders, brokers and dealers.
Earlier proposals took a threshold approach. Sen. Ted Budd's S.4171, introduced March 24, would require both transaction value and the otherwise recognized gain or loss to be $200 or less.
Frequently asked questions
Which stablecoins would qualify for the ADAPT Act's tax relief?
A qualifying token must be a US dollar stablecoin issued by a permitted payment stablecoin issuer under the GENIUS Act. It must appear in Treasury's most recent report before the payment, and the taxpayer must have acquired it at a price within 3% of $1.00.
Would paying with Bitcoin still be taxable under the ADAPT Act?
Yes. Section 1034 covers only stablecoins, so a Bitcoin payment at checkout would remain a taxable disposition requiring cost-basis calculation. The BTC paid as a network fee could qualify under a separate $10 fee exception in section 1044.
When would the ADAPT Act's crypto tax changes take effect?
The stablecoin provision would apply to transactions entered into starting Jan. 1, 2027, and the fee exception would apply to dispositions from the same date. The bill is a proposal and has not been enacted.
