Purchasing a coffee with an eligible dollar stablecoin would bypass gain-or-loss recognition under the ADAPT Act, unveiled Sept. 30 by Sen. Steve Daines. Meanwhile, buying that same cup of coffee using Bitcoin would still necessitate the cost-basis calculations and capital gain or loss reporting typically required when spending digital assets.
Bloomberg Law reported on Sept. 25 that Daines had circulated an early draft ahead of an anticipated introduction the following week. The 56-page legislation, officially titled the Aligning Digital Assets with Principles of Taxation Act, was released on Sept. 30 and counts Sens. Cynthia Lummis, Bernie Moreno, and Tim Scott of South Carolina as cosponsors.
Under current Internal Revenue Service guidance, using digital assets of any value to pay for goods or services constitutes a disposition. Individuals holding personal or investment assets must determine and report any capital gains or losses, a process dictated by the asset’s original cost basis and current value.
Such transactions can result in a gain, a loss, or a break-even outcome, with the IRS frequently utilizing a cup of coffee to illustrate the rule. For instance, spending $5 in Bitcoin that carries an allocated basis of $3 generates a taxable $2 capital gain that must be included on a tax return.
What qualifies as a covered stablecoin
A newly proposed section 1034 of the tax code would classify the use of covered payment stablecoins for purchasing goods and services as a nonrecognition event. While this exemption covers gains or losses tied directly to the token, obligations like sales taxes and other purchase fees remain applicable.
To qualify, the token must be a sanctioned U.S. dollar stablecoin issued by an authorized payment stablecoin issuer pursuant to the GENIUS Act.
Foreign issuers may qualify either through registration with the Office of the Comptroller of the Currency or via a determination by the Treasury Department that their domestic regulatory framework is comparable. Such issuers must appear on the Treasury’s most recent report issued prior to the transaction, and the taxpayer must have acquired the asset at a price within 3% of $1.00.
The Treasury would be mandated to publish this report at least once every three months, detailing every qualified stablecoin that actively traded within 3% of $1.00 during the preceding 12 months ending the prior month. Both consumers and payment processors would consult this updated registry at the time of purchase.
Traders, brokers, and dealers operating in qualified dollar stablecoins are excluded from the relief, as are taxpayers utilizing a functional currency other than the currency of the United States. Furthermore, the Treasury holds the authority to expand this trade-or-business exclusion to comparable entities.
Taxpayers are required to maintain records that clearly differentiate eligible payments from other financial activities. Transactions meeting these criteria would be exempted from broker information return mandates under section 6045(i)(1), permitting brokers to rely on customer certifications without independently verifying the 3% acquisition threshold for tokens sourced elsewhere. This stablecoin provision is slated to take effect for transactions occurring on or after Jan. 1, 2027.
Bitcoin keeps its paperwork, with one fee carve-out
Because section 1034 specifically targets stablecoins, utilizing Bitcoin at checkout continues to be treated as a taxable disposition, though Section 11 introduces a more limited provision concerning transaction fees.
Under a new section 1044, digital assets disposed of strictly to cover transaction costs will be shielded from gain-or-loss recognition, provided the combined value of the assets utilized for those fees is $10 or less. This covers base, gas, and priority fees, with related transactions being evaluated in aggregate.
Exclusions from this rule apply to traders, brokers, dealers, businesses that batch transactions or assist in validating them on behalf of others, and assets subject to mark-to-market accounting. Individuals who executed more than 5,000 digital asset transactions during the prior taxable year are similarly excluded.
This fee exemption applies to dispositions executed on or after Jan. 1, 2027, aligning with the effective date of the stablecoin provisions. Consequently, when purchasing coffee with Bitcoin, the fractional amount of BTC spent on network fees might be excused, while the primary portion of the coins sent directly to the merchant remains a taxable disposition.
Additionally, the legislation exempts qualified dollar stablecoins from the wash-sale and constructive-sale provisions that it applies to other digital assets.
Earlier bills used dollar thresholds
Prior legislative efforts attempted to ease tax compliance burdens for routine personal cryptocurrency transactions by establishing specific monetary thresholds.
Introduced on March 24, Sen. Ted Budd’s S.4171 proposed limiting both the transaction value and the otherwise recognized gain or loss to a maximum of $200. This measure required the aggregation of related transactions and excluded exchanges involving business property or cash equivalents.
Another measure, S.2207, unveiled by Sen. Lummis in July 2025, established a $300 limit for both transaction amounts and recognized losses, while terminating further exemptions once qualifying annual gains surpassed $5,000.
While the House PARITY Act previously suggested a $200 limit specifically for stablecoin transactions, Lummis’s current cosponsorship ties tax relief directly to qualifying stablecoins regardless of purchase size.
The House maintains an independent proposal under H.R.10357, introduced Sept. 14, which the Ways and Means Committee advanced by a 38-5 vote on Sept. 16. Its mechanisms—involving stablecoin redemption-value accounting and relief for qualifying $10 fees—differ from the Senate bill, and committee clearance represents an initial step prior to any potential House vote.
What happens next for stablecoin and Bitcoin
These measures remain strictly in the proposal stage, meaning the current regulatory framework enforced by the IRS remains active. The text directs the Treasury Department to establish operational frameworks, encompassing quarterly reporting lists, recordkeeping mandates, and broker reporting standards. Because the legislation adopts issuer definitions directly from the GENIUS Act, token eligibility will depend on regulatory approvals granted under that statute.
For the average consumer, the Daines bill establishes a distinction based on the specific asset utilized at checkout, irrespective of the transaction’s dollar amount. A $5 coffee purchased with an approved stablecoin would escape gain-or-loss accounting, whereas purchasing that identical coffee with Bitcoin would remain bound to capital-gains reporting requirements.