Despite new crypto legislation, the IRS still treats digital assets as property, leaving key tax rules unchanged for traders and investors.

The crypto regulatory landscape is evolving rapidly, but one thing remains unchanged: the IRS still treats cryptocurrencies as "intangible property" for tax purposes. Despite major legislative developments like the July 2025 GENIUS Act and the House-passed CLARITY Bill (pending in the Senate), tax treatment has not shifted.

Property, Not Securities or Commodities

The IRS’s classification—originally laid out in Notice 2014-21—means crypto is taxed under capital gains rules for property, not as securities (which trigger wash sale rules) or commodities (which may qualify for favorable Section 1256 treatment). For a digital asset to be taxed as a security, it generally must resemble traditional equities, such as stock or bonds. Most crypto tokens do not meet that test.

Bitcoin futures, however, are an exception. Traded on regulated futures exchanges like the CME, they qualify as Section 1256 contracts with a 60/40 capital gains split and mark-to-market (MTM) at year-end. But spot crypto holdings and most tokenized assets remain property.

GENIUS Act: Compliance Without Tax Impact

The GENIUS Act introduces robust reserve, audit, and disclosure requirements for U.S. stablecoin issuers, including 1:1 asset backing and monthly financial attestations. However, it does not reclassify stablecoins for tax purposes.

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CLARITY Bill: Regulatory Structure, Not Tax Change

The CLARITY Bill provides a framework for determining whether a digital asset is a security or a commodity, largely based on decentralization. The SEC and CFTC share oversight under the proposal. But this classification does not override the IRS's existing stance—digital assets remain property unless tax law changes.

Why It Matters

  • No wash sale rules apply to crypto, allowing more flexible loss harvesting.
  • Crypto traders can’t elect Section 475 MTM or claim the 20% QBI deduction.
  • Bitcoin ETF investors (e.g., IBIT on Nasdaq, FBTC on CBOE) are treated as direct holders of property.
  • Trader tax status still provides business expense deductions for qualifying traders.

Update for 2025: The IRS will begin requiring brokers to issue Form 1099-DA for digital asset transactions occurring in 2025, with gross proceeds reporting starting in 2025 and cost basis required in 2026. This new reporting form adds enforcement pressure—but doesn’t change the IRS’s underlying tax treatment of crypto as “property.”

Bottom Line

Until Congress amends the tax code or the IRS updates its guidance, digital assets are taxed as property. That’s good news for traders looking to harvest losses—but it also means they miss out on some of the favorable treatments available to securities or commodities traders.

Disclaimer: This article is for informational purposes only and does not constitute tax advice. Please consult a qualified tax professional for guidance.

For a more in-depth analysis, see a longer-form version of this blog post on GreenTraderTax.com.

Robert A. Green, CPA is CEO of GreenTraderTax and a contributor to Forbes on trader and crypto tax issues.