A question I’ve been getting about the Virtual Currency Tax Fairness Act is whether it provides cryptocurrency with favorable tax treatment relative to foreign currency. If the bill passed, crypto transactions would get the same kind of de minimis exemption as foreign currency transactions, but would otherwise be treated as property, which some view as potentially more favorable treatment than foreign currency.

That’s a good question, but I don’t think there’s any contradiction. It’s easy to fixate on the differences between “property” and “foreign currency,” but I think it’s more fruitful to focus on the similarity of the problem Congress is seeking to fix here and the one it fixed in foreign currency.

In the case of foreign currencies, before the exemption was enacted, you had a situation in which large numbers average citizens were frequently engaging in small, personal foreign currency transactions (such as when they went on vacation abroad) but they where not reporting these, and indeed maybe didn’t even know they had to. Of course, this was an unintended consequence of the law, and Congress properly sought to give relief to otherwise law-abiding taxpayers who paid for stuff with foreign currency. It did so by giving them an exemption if those transactions were small and personal in nature.

The case with crypto is exactly the same. Otherwise law-abiding citizens are using crypto in small, personal transactions and they’re facing the exact same unintended consequence as foreign currency users did. Therefore, cryptocurrency users today aren’t asking for special treatment relative to foreign currency, they are just asking for the same kind of reasonable, limited relief that Congress saw proper to give foreign currency users when they were in the same situation.

If Congress wanted to be completely consistent, it could classify cryptocurrency as foreign currency. But since that is likely not in the cards, there’s nothing inconsistent or preferential about giving crypto transactions the same de minis exemption it gave foreign currency transactions.