WASHINGTON—House Democrats are putting forward legislation that they say will help close a tax loophole for cryptocurrency investors, making it so crypto is subject to anti-abuse rules applying to stocks, bonds and other securities.
According to CNBC, the bill would put forward a “wash sale” rule for commodities, currencies and digital assets, per an outline from the House Ways and Means Committee.
Wash sale rules make it so investors cannot reap tax benefits from a losing investment and then buy back the same asset right after, the report noted.
The IRS currently looks at crypto as a property rather than a security. As a result, the asset class is largely able to escape the rule.
“Thus, crypto investors can sell crypto for a loss, then claim a tax benefit — with the loss making it so capital gains tax on winning investments is cut down. And then after that, they can buy back the crypto quickly, which they’d sold to capture at any rebound in price. The volatility of much cryptocurrency makes this a likely prospect,” Pymnts.com noted.