New Cryptocurrency Regulations May Affect Taxes on Stablecoins

 Posted on July 25, 2025 in Taxation Law

As more and more people buy, sell, and trade cryptocurrencies, the United States government is looking to implement new regulations that provide oversight for these markets. Recently, Congress passed the GENIUS Act, which puts new regulations in place related to stablecoins. While many of these regulations apply to issuers of stablecoins, people who own and trade these cryptocurrencies will need to understand how their tax obligations may be affected.

When addressing legal concerns related to cryptocurrency taxes, it is important to work with an attorney who has a strong understanding of the tax laws that apply in these situations. A skilled lawyer can help address any potential penalties that may apply when cryptocurrency transactions have not been reported correctly while also working with taxpayers to make sure they maintain compliance with the applicable tax laws.

What Are Stablecoins?

There are countless virtual currencies that may be issued, used to make payments, paid to employees as income, and traded on online marketplaces. These range from well-known cryptocurrencies like Bitcoin and Ethereum to "memecoins" issued by celebrities or others who take advantage of online trends. Many cryptocurrencies fluctuate wildly in value depending on market trends, which can make them risky investments. 

To limit the volatility of certain types of investments, stablecoins have been created. These cryptocurrencies are tied to assets that have a stable value, including fiat currencies like the U.S. Dollar. They are meant to be a more reliable form of currency that can be used to store value.

What Is the GENIUS Act?

Recently, Congress has taken steps to regulate stablecoins and other cryptocurrencies. The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which was signed into law by President Donald Trump on July 18, 2025, has put several regulations in place, including:

• Issuers must back stablecoins with asset reserves on a 1:1 basis, and they must keep these reserves in the form of highly liquid assets to ensure that stablecoins can be redeemed for other assets when necessary.

• Stablecoin issuers are required to publish disclosures of their reserves on a monthly basis, and monthly third-party audits will also be required.

• Stablecoin issuers are considered to be financial institutions, and they are required to put anti-money laundering (AML) programs in place and follow due diligence procedures.

• Interest cannot be paid on stablecoin investments.

• Issuers are prohibited from implying that they have backing from the U.S. government or another country or that stablecoins are legal tender.

How Does the GENIUS Act Affect Stablecoin Taxes?

As with other types of cryptocurrencies, stablecoins will be treated as property for tax purposes. All stablecoin transactions may be considered taxable events. When stablecoins are paid to employees as wages, income taxes will apply. When stablecoins are purchased, sold, or traded, gains or losses may be reported based on the market value of these assets when they were originally acquired and when they were sold or transferred. Capital gains taxes may apply.

In cases where stablecoins are issued by foreign individuals, businesses, or organizations, regulators will closely scrutinize transactions involving these assets. U.S. taxpayers who hold these assets or engage in transactions involving foreign-issued stablecoins will be subject to the Foreign Account Tax Compliance Act (FATCA), and they will be required to report foreign assets by filing a Foreign Bank and Financial Account Report (FBAR), as appropriate.

Contact Our San Jose Tax Law Attorney

As new regulations are put in place to address cryptocurrency transactions, it is important to make sure tax-related issues are handled correctly. At John D. Teter Law Offices, our San Jose, CA tax lawyer can provide guidance on the laws and regulations that apply to stablecoins and other digital assets, and we can help taxpayers take steps to avoid penalties or resolve any other issues that they may encounter. Contact our firm today at 408-866-1810 to arrange a consultation with our attorney.