US wants to abolish double taxation on cryptocurrency staking

Key points:

• US lawmakers are demanding that the IRS review the rules for taxing cryptocurrency staking and abolish double taxation.
• The proposed reforms include deferral of tax payments and exemption of small crypto payments.

US lawmakers have called on the Internal Revenue Service (IRS) to review the rules for taxing cryptocurrency staking by 2026. There is growing bipartisan support in Congress for the idea of abolishing the double taxation that currently applies to staking participants.

The initiative was put forward by 18 congressmen from both parties. In a letter to Acting IRS Commissioner Scott Bessent, they pointed out that the current rules unfairly tax staking rewards twice — at the time of receipt and at the time of sale of the asset.

Lawmakers are proposing a change in approach. Specifically, they are discussing exempting small payments in stablecoins up to $200 from tax, as well as the possibility of deferring taxes on staking and mining income for up to five years. One of the authors of the initiative is Congressman Mike Carey, who believes that the current system discourages Americans from participating in blockchain networks and undermines the competitiveness of the United States.

Why the current rules are causing outrage

The problem arose after the IRS clarified in 2023 that staking rewards are considered taxable income immediately upon receipt, even if their value is minimal. Upon subsequent sale, investors pay tax again — this time on capital gains.

Critics call this model double taxation. In their opinion, stakers create a new digital asset that should not be taxed until it is sold. At the same time, complex tax rules reduce interest in participating in Proof-of-Stake networks, on which the security of blockchains directly depends.

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In addition to Carey’s initiative, the PARITY bill has been introduced in Congress. It provides for an alternative mechanism for deferring taxation for up to five years. Representatives of the crypto industry support the reform and say that fair tax conditions are necessary for the development of blockchain infrastructure in the US.