On Sept. 30, Sen. Steve Daines released the 56-page Aligning Digital Assets with Principles of Taxation (ADAPT) Act, proposing tax-free treatment for qualifying U.S. dollar stablecoin purchases while keeping Bitcoin subject to IRS capital gains reporting. Co-sponsored by Sens. Cynthia Lummis, Bernie Moreno, and Tim Scott, the draft text follows a Sept. 25 Bloomberg Law report outlining the initiative. The proposed legislation establishes distinct tax classifications for everyday cryptocurrency transactions starting Jan. 1, 2027.
Key Takeaways
- Stablecoin Exemption: Everyday purchases made with covered U.S. dollar stablecoins acquired within 3% of $1.00 will avoid capital gain or loss recognition.
- Bitcoin Status: Payments made directly with Bitcoin remain taxable dispositions, though new Section 1044 exempts transaction fees up to $10.
- Issuer Compliance: Qualifying stablecoins must meet GENIUS Act standards and appear on a quarterly published Treasury list.
How the ADAPT Act Treats Stablecoins and Bitcoin
Under existing IRS regulations, using any digital asset to purchase goods or services triggers a taxable disposition. Holders must calculate cost basis and capital gains, such as a $5 coffee purchase with a $3 allocated basis yielding a $2 taxable capital gain. The ADAPT Act introduces new Section 1034 to treat covered payment stablecoins used for goods or services as a nonrecognition event. The token must be issued by a permitted entity under the GENIUS Act (or an OCC-registered/Treasury-approved foreign regime) and acquired within 3% of $1.00.
The Treasury would publish a report at least every three months listing qualified stablecoins actively traded within 3% of $1.00 during the previous 12 months. These covered transactions would also be exempt from broker information returns under Section 6045(i)(1). Furthermore, the bill exempts qualified dollar stablecoins from wash-sale and constructive-sale rules.
Conversely, spending Bitcoin on products remains a taxable event. However, new Section 1044 creates an exception for transaction costs, shielding base, gas, and priority fees from tax liabilities when the aggregate fee value is $10 or less. This fee exclusion excludes taxpayers who initiated more than 5,000 digital asset transactions in the prior taxable year.
Legislative Context and Next Steps
The draft replaces previous statutory approaches that relied on fixed monetary thresholds for all digital asset purchases. Sen. Ted Budd’s S.4171, introduced March 24, proposed a $200 threshold, while Sen. Lummis’s S.2207 set a $300 transaction limit in July 2025 with a $5,000 annual gain cap. Additionally, the House PARITY Act suggested a $200 stablecoin limit, while H.R.10357 was introduced Sept. 14 and approved 38-5 by the Ways and Means committee on Sept. 16.
As lawmakers continue debating crypto regulation proposals, these provisions remain proposals while current IRS rules stay in force until the target Jan. 1, 2027 effective date.
Why It Matters
By drawing a clear distinction between dollar-pegged payment tokens and floating digital assets, the bill signals a federal preference for stablecoins as transactional currencies. If enacted, consumers could freely use stablecoins for daily commerce without tracking micro-gains, while Bitcoin remains legally structured as an investment asset subject to strict accounting. This bifurcated approach provides operational clarity for payment processors, though it reinforces compliance friction for individuals attempting to use non-pegged cryptocurrencies for retail spending.
