Hana Field: Hey — rough week, but then I read something that genuinely stopped me and now I need to talk it through with you.
Hana Field: The Treasury says extending wash-sale rules to crypto raises nearly $24 billion over ten years. That's their 2024 estimate. And there's a bill — Arrington's bill, introduced June 2026 — and I keep thinking, twenty-four billion dollars is a number that makes Congress move. And then it doesn't move. Why?
Iris Holm: Because Bitcoin isn't a security. That's the whole problem.
Hana Field: Which is — yes, and that's what we're getting into today. Jodey Arrington introduces the Applying Existing Tax Anti-Abuse Rules to Digital Assets Act, it generates a news cycle off Greg Iacurci's July 28th piece in CNBC, and the fundamental question is whether this bill actually solves anything. Because here's the contradiction I keep hitting: Bitcoin ETF holders already fall under wash-sale restrictions right now. Under existing law. And direct token holders don't. Same asset. Different rules. How?
Iris Holm: IRS Notice 2014-21. The IRS classified cryptocurrency as property, not a security. And §1091 — the wash-sale provision — only covers stocks and securities. So direct token holders are outside it by definition.
Hana Field: So you keep saying loophole — but if the IRS drew that line, isn't that a classification accident more than an exploit?
Iris Holm: Frankly, the distinction matters less than the effect. The effect is: a trader sells Bitcoin at a loss, buys it back the same afternoon, and books a deductible loss. A stock trader can't do that. Call it an accident, call it a gap — it's a $24 billion asymmetry. And Arrington's bill doesn't fix the classification. It just extends the enforcement.
Hana Field: And that asymmetry is the thing I want to just — make concrete for a second, because I think it sounds technical until it suddenly doesn't. So imagine someone, April 2024, holding Ethereum. Down forty percent. And the discipline she's built — you know, she sells a chunk, books the loss, buys straight back in, same day, stays fully exposed to the price. Under current IRS rules, that's just legal. The loss counts. She gets the deduction.
Iris Holm: Here's the plain version. Own stock, own crypto, both down forty percent. Sell the stock at a loss, buy it back within thirty days — IRC §1091 says that loss is disallowed. You're just parking money to dodge taxes. Sell the Ethereum, buy it back the same second — the IRS has no rule against it. Because crypto is property. §1091 doesn't reach property. That's the entire loophole.
Hana Field: One sentence.
Iris Holm: IRS Notice 2014-21 made crypto property, not a security. Everything downstream follows from that one classification.
Hana Field: And that's what — okay, that's actually what bothers me. That trader in April 2024 wasn't cheating. She read the rules, she adapted, she built a whole practice around a legal structure the IRS itself created. And now Arrington's bill passes, and what — she just retroactively becomes the problem?
Iris Holm: Not retroactively. The bill doesn't claw back past deductions. But going forward? Yes, that strategy dies. The loss harvesting she built around Notice 2014-21 — gone.
Hana Field: Right — but the part that doesn't fit is this: Bitcoin is still well below its October 2025 level as of late July 2026. Meaning tax-loss harvesting is still live, still attractive, right now, for a lot of direct holders. The Arrington bill is moving — slowly — while the thing it targets is actively happening.
Iris Holm: Which is the harder question hiding inside all of it. Does closing this actually reach the people doing it at scale — or does it land hardest on retail holders who never had the sophistication to use a Bitcoin ETF in the first place?
Hana Field: And that's what makes the 'renewed push' framing feel so thin to me. Because the Biden administration put the exact same extension in its FY2025 budget. Before that, other attempts. It keeps failing — and now Arrington drops this bill in June 2026, an election year, and Greg Iacurci's July 28th piece makes it a news cycle, and suddenly everyone's calling it momentum. What's actually different this time?
Iris Holm: The Crapo vehicle is real. Mike Crapo — Senate Finance — signaled a markup of a stalled tax-administration bill is back on. That's an actual legislative container. And House Ways and Means gave the Arrington bill attention. Those aren't nothing.
Hana Field: But — okay, and I want to press on this — 'signaled a markup is back on' is doing enormous work in that sentence. That's not a scheduled vote. That's a committee chair keeping a door open.
Iris Holm: Tax experts and legislative analysts said in July 2026 that passage before the midterms is unlikely. That's the actual consensus. So yes — activity is real. Momentum toward law? Different claim.
Hana Field: Which means the $24 billion is doing all the rhetorical lifting. And that number — so, that estimate is from 2024, and Bitcoin is materially lower now than it was at its October 2025 level. The tax-loss harvesting volume the Treasury was modeling against? That's not the same market.
Iris Holm: Nobody's updated it.
Hana Field: Nobody's updated it. And that's — I mean, if the fiscal anchor for this bill is a 2024 Treasury projection that assumed a different price environment, and the actual number has quietly deflated, and Congress is still citing it... that's a campaign message wearing a revenue estimate.
Iris Holm: Look — the Crapo markup could still move. But conditional and vague is a real description of where it sits. Can you point to a Senate Democratic floor commitment before November? Because I can't.
Hana Field: No. And honestly that gap — activity versus actual momentum — it's exactly what we'll have to weigh when we get to who actually absorbs the adjustment if this ever does pass, because the distributional answer there is not what the fairness framing suggests.
Iris Holm: And the distributional answer is the one that actually stings. Because ITEP's July 16th report frames the wash-sale exemption as unjustified privilege — like crypto traders are extracting something. But if you trace who actually holds direct tokens versus Bitcoin ETFs, the privilege isn't going where they think.
Hana Field: Wait — what do you mean it's not going where they think?
Iris Holm: Bitcoin ETF shares already face wash-sale restrictions. Right now. Under §1091. Because an ETF is a security. So the sophisticated money — institutional traders, structured derivatives, the people with compliance infrastructure — they're mostly not in direct token holdings. The direct token holders are the smallest, least infrastructure'd cohort.
Hana Field: So the Arrington bill — if it passes — the only people whose behavior actually changes are direct holders. Who are probably... the retail end.
Iris Holm: We'd be equalizing down, not up. The institutional layer is largely already equalized. The IRS Notice 2014-21 gap that remains — it's being held mostly by the smaller, less sophisticated investor. And there's no grace period in the current bill. Nothing. So someone who built a legitimate tax-loss harvesting practice around a rule the IRS itself created gets no runway.
Hana Field: Okay — the fairness argument genuinely does cut both ways, and I didn't fully see that until now. But — and I want to sit with this — sophisticated institutional players using structured derivatives are probably untouched even after the bill passes. That's not a detail, that's the whole equity question.
Iris Holm: That's the second-order consequence nobody in the House Ways and Means conversation is naming. The ITEP framing, the proponents' framing — it's straightforward tax equalization between crypto and securities investors. But equalization between which crypto investors and which securities investors? Because the ones who'll feel it are the ones with the least cushion to adapt.
Hana Field: And with no grace period in the Applying Existing Tax Anti-Abuse Rules to Digital Assets Act as written — I mean, you don't just absorb that overnight if you're not a fund with a compliance team.
Iris Holm: No. And that's the actual cost the $24 billion Treasury estimate doesn't capture.
Hana Field: And that cost lands on the person who least expected to absorb it. But even past the distributional question, I'm worried about whether the rule does anything at all without the IRS having actual capacity to enforce it. Because even if Crapo's markup moves and Arrington's bill gets attached — the IRS would need to audit crypto traders at the scale it audits securities investors. And it won't. So who actually feels the wash-sale rule? Whoever happens to be visible to an auditor. That's not fairness. That's just... exposure.
Iris Holm: Fairness on paper is a different question from equity in practice. And I don't have a clean answer to that.
Hana Field: No. Neither do I. And I think that's actually where this conversation has to sit — not with the bill, not with the $24 billion, but with that. We might be writing a rule we already know we can't enforce evenly.
Iris Holm: Mm. The asymmetry doesn't end with passage.
Hana Field: It just moves somewhere harder to see. Thanks for working through this with me.
