The wash sale rule does not currently apply to cryptocurrency. What does this mean? This means a crypto investor can sell a digital asset at a loss to harvest the tax deduction, and then immediately buy back the exact same coin without waiting the standard 30 days required for stocks. However, investors should be careful with crypto exposure held within traditional wrappers, such as spot Bitcoin ETFs. Because these are exchange-traded trust shares and treated as securities, wash-sale rules can still apply to them. While investors have utilized this strategy for years, its days may be numbered. In May 2026, a bipartisan group of lawmakers introduced the PARITY Act, a piece of legislation aimed at modernizing digital asset tax rules. A key provision of this bill proposes extending the IRC § 1091 wash-sale rules to digital assets, an action the bill's sponsors refer to as closing the "fake-loss loophole". While this specific legislation has not yet been passed into law, it represents a continued legislative push to align crypto tax reporting with traditional financial markets. Even without a formal wash-sale rule on the books, tax professionals warn against heavily abusing this strategy. The IRS can still challenge losses under the "economic substance doctrine" if trades do not reflect a real economic change. If a taxpayer uses automated, systematic same-day loss cycling purely to manufacture deductions without taking on any real market risk, the IRS could potentially scrutinize and disallow those losses during an audit.