The IRS classifies cryptocurrencies as property rather than securities. So, the wash sale rule doesn’t apply if you sell a cryptocurrency holding for a loss and acquire the same cryptocurrency shortly before or after the loss sale. You just have a short- or long-term capital loss depending on your holding period.

To illustrate, let’s say you bought a cryptocurrency holding high and sold it low for a $50,000 loss. During the year, you also rang up over $100,000 of stock gains in your taxable brokerage firm account. You can offset $50,000 of your stock gains with the $50,000 loss from the cryptocurrency investment — even if you buy back into the same cryptocurrency shortly after the loss sale.

This favorable federal income tax treatment is consistent with the longstanding treatment of foreign currency losses set forth in IRS Revenue Ruling 74-218. It would probably take an act of Congress to make cryptocurrency losses subject to the wash sale rule, but that could happen. Check with your tax advisor for possible developments.

Important: Losses from selling crypto-related securities, such as Coinbase stock (COIN on NASDAQ), can fall under the wash sale rule, because the rule applies to losses from assets classified as securities for federal income tax purposes. For now, cryptocurrencies themselves are classified as property, not securities.