A new bipartisan cryptocurrency bill from Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) creates an ambitious regulatory framework for digital assets. Known as the Responsible Financial Innovation Act, it aims to clarify several legal issues, protect investors, provide more favorable tax treatment, and encourage the continued growth of the nascent crypto industry. (See the full text here.)

Here are 7 of the most important proposals to know about in the law on responsible financial innovation.

Keep in mind: The bipartisan cryptocurrency bill will likely go through several changes as it makes its way through Congress. It could be years before any provisions of this bill are passed or enacted into law, if at all.

1. No tax for capital gains under $200 (in certain transactions)

Under the Responsible Financial Innovation Act, capital gains from certain cryptocurrency transactions would be exempt from tax. This would apply to personal operations this:

  • The purchases of goods and services; cashing out, exchanging, or converting crypto would not qualify for the exemption
  • Results in a capital gain of less than $200
  • Are not business related or do not generate income

This $200 limit applies to each disposal of crypto. But if you need to complete multiple steps as part of the same transaction, it will be treated as one disposition.

2. Non-taxable mining and staking rewards until sold

Currently, cryptocurrency earned through mining or staking is taxed as ordinary income upon receipt. The new Cryptocurrency Bill seeks to change that, saying mining or staking rewards will not be taxable until the crypto has been sold or disposed of (this includes converting a type of crypto into another).

This would be a big win for cryptocurrency miners and node operators. A Tennessee couple recently sued the IRS over this tax issue in a high-profile case. IRS staking cases.

3. Crypto loans are generally not taxable

The Responsible Financial Innovation Act aims to solidify favorable tax treatment for cryptocurrency lending. Already, loans (including crypto loans) are not considered taxable income.

However, some scenarios create gray areas in the law. For example, on the popular Compound platform, you exchange your collateral, ETH, for a protocol token called cETH. When you are ready to exit, you exchange the cETH for more ETH than you initially put in.

In a prudent tax position, this could be considered a taxable event that triggers a capital gain. But under the new bill, simply exchanging your crypto collateral for a placeholder token would not be taxable. (Note: There may be an exception if there is a market for your placeholder token/protocol token.)

Importantly, this framework allows financial institutions to treat cryptocurrency as collateral— something that is currently not accepted by most traditional banks.

4. Limiting the Scope of Reports to the IRS

In 2021, the Infrastructure Investment and Employment Act passed with a controversial crypto provision included. This forces cryptocurrency exchanges and other digital asset “brokers” to report customer transaction information to the IRS, as traditional stockbrokers already do.

The law’s definition of “broker” has been criticized for being too broad and creating reporting requirements for some people who could not meet them.

The Lummis-Gillibrand bill seeks to change that. He defines a broker as someone who “stands ready, in the ordinary course of a trade or business, to affect the sales of digital assets at the direction of his clients.” It would also delay the entry into force of reporting requirements to 2025 instead of 2023.

5. Pass the reins to the Commodity Futures Trading Commission (CFTC)

The Bipartisan Cryptocurrency Bill defines most cryptocurrencies as commodities, which would place them under the regulatory control of the Commodity Futures Trading Commission (CFTC).

Currently, the Securities Exchange Commission (SEC) is the #1 crypto watchdog because many crypto assets are considered securities. The SEC has been crack down tough on unregistered securities offerings in the crypto industry.

This mainly affects token creators and brokers, who currently have to comply with SEC law— a costly and complex task filled with extensive reporting requirements. Under the new bill, they would have to worry about relatively minor SEC reports and would be subject to the CFTC’s more lenient regulations.

The Lummis-Gillibrand bill states that a crypto product can only be considered a security if it offers the same types of benefits as investing in a company, such as:

  • Dividends
  • Liquidation rights
  • A financial interest in the issuer

6. Possible tax changes if crypto is a commodity

While most cryptocurrencies are considered commodities, this could have a major impact on how they are taxed, if the IRS agrees.

Even though the Responsible Financial Innovation Act passes and defines cryptocurrencies as commodities, the IRS may not follow this classification. But if they did, crypto taxation would face 2 big changes.


Currently, every crypto transaction must be listed on Form 8949, with a calculated gain or loss for each. You need to know the cost basis and holding period of each token or fraction of a token, which is why reporting crypto taxes is so difficult.

However, commodities use a mark-to-market valuation method for year-end accounting. Essentially, all assets held at the end of the year will be considered sold on the last day of the year, and all assets entering the following year will have a cost basis based on fair market value.

With mark-to-market valuation, any unrealized gains or losses at the end of the year will be added to the calculation for income tax purposes.

60/40 tax rule

Capital gains from the sale or trading of commodities follow a 60/40 rule: 60% of profits are taxed as long-term capital gains (with a maximum tax rate of 15%), while 40% is taxed as short-term capital gains (taxed at your ordinary tax rate).

Generally, this can be favorable for frequent traders, but not so much for HODLers who have used non-taxable methods such as loans or staking to maintain their holding periods.

7. Legitimize DAOs

Although some states, including Wyoming and Tennessee, allow a business to register as a Decentralized Autonomous Organization (DAO), the lack of federal tax recognition still presents a barrier.

The new Crypto Bill defines DAOs as business entities for tax purposes. A DAO would still need to be registered as an entity under the jurisdiction of the state – in most states this means it would need to be a SARL, C-corporationor similar.