White House Proposes Billions in Funding for Clarity Act and Crypto Tax Reform

In addition to the Clarity Act, the White House’s budget proposal for 2026 aims to address the wash sale loophole that allows cryptocurrency traders to realize losses and promptly repurchase assets. While this practice is prohibited for stock investors, it remains permissible under the existing regulations governing digital assets.

This proposal would introduce wash sale regulations for cryptocurrencies for the first time, aligning the tax treatment of digital assets with that of conventional securities. It also proposes a 30% excise tax on the electricity consumed for crypto mining through the DAME (Digital Asset Mining Energy) tax, along with a FATCA reporting obligation for U.S. taxpayers with over $50,000 in foreign cryptocurrency accounts.

Key Takeaways

• The 2026 White House Budget suggests implementing wash sale regulations for cryptocurrencies, closing a loophole not accessible to equity traders.
• The Treasury anticipates that this change could yield $5.4 billion in revenue over a decade.
• A 30% Mining Tax on electricity expenses specifically targets proof-of-work mining operations.
• FATCA reporting requirements would extend to foreign crypto accounts exceeding $50,000.
• The proposal is likely to encounter significant legislative challenges in a Congress that has been leaning towards pro-crypto regulations.

Understanding the Wash Sale Rule

Currently, the wash sale rule prevents stock investors from claiming a tax loss if they repurchase the same or a substantially identical security within a 30-day period. As cryptocurrencies are categorized as property rather than securities, this rule does not apply.

Traders have capitalized on this loophole by selling a Bitcoin position at a loss to secure a deduction, then immediately repurchasing to maintain their investment. This practice, known as tax-loss harvesting, has been entirely legal for cryptocurrency holders.

Wash Trading: An exchange purchases an asset to liquidate its short order book, while simultaneously selling the asset to liquidate its long order book.
Repeat until regulations are established.
Example: Binance and others can repeatedly buy and sell the same block of Bitcoin at any price necessary to liquidate…

— MartyParty (@martypartymusic) April 28, 2026

The White House proposal aims to eliminate this loophole. If enacted, cryptocurrencies would be subjected to the same 30-day restriction as equities.

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Is There a Viable Path for This Proposal in Congress, Similar to the Clarity Act?

The political dynamics are clear. The same White House advocating for the CLARITY Act as a supportive regulatory framework for cryptocurrencies is also proposing new tax regulations for digital assets. This is not seen as contradictory by the administration; rather, it presents the crypto tax proposal as a matter of fairness, not retribution. However, it is perceived differently on Capitol Hill.

This is unfolding right now in Washington
A new crypto tax framework could:
• Eliminate tax loss harvesting
• Tax unrealized gains
• Increase IRS oversight into DeFi
If you are not preparing for this, you are falling behind#CryptoTax #DigitalAssets #TaxCompliance #CryptoRegulation… pic.twitter.com/U5MLDZNVBe

— Gordon Law Group | Crypto Tax Lawyer (@gordonlawltd) April 28, 2026

Congress is currently trending towards legislation that favors cryptocurrencies. The ongoing debate regarding the CLARITY Act in the Senate Banking Committee is already consuming legislative resources, and a crackdown on crypto taxes contradicts that momentum.

Simultaneously, the SEC is addressing significant regulatory proposals, including an 85-item rule change that impacts Bitcoin and XRP ETF listings, with crypto policy being influenced by various competing interests.

For context, similar proposals regarding wash sales were introduced during both the Obama and Biden administrations but failed to pass through Congress.

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