U.S. imposes tax on cryptocurrency staking
U.S. imposes tax on cryptocurrency staking
The Internal Revenue Service (IRS) has issued an edict that crypto investors must count as income rewards for participating in verification activities on Proof-of-Stake (PoS) networks.
The IRS clarified the tax assessment for cryptocurrency staking, which applies not only to individual investors but also to those who place tokens through cryptocurrency exchanges, CoinDesk reported.
The fair market value of the stakes will be included in the taxpayer's gross income in the year the investor gains control of those tokens. Thus, a taxable event occurs when the investor gains the right to sell or dispose of the tokens.
The IRS said the rule also applies to investors who place tokens through cryptocurrency exchanges if they are rewarded for participating in network verification.
The IRS tax guidance comes as federal and state regulators have increased scrutiny of cryptocurrency exchanges' betting services. The U.S. Securities and Exchange Commission (SEC), which considers cryptocurrencies to be securities, is paying particular attention to betting and such platforms.
For example, the Kraken exchange was forced to shut down its betting platform at the beginning of 2023 after being charged by the SEC.
Lawmakers in the U.S. House of Representatives previously urged the IRS to develop comprehensive guidance on cryptocurrency taxation as soon as possible, to make it easier for companies to regulate and comply with the industry.
The IRS ruling is intended to bring clarity to the taxation of cryptocurrency staking rewards. As a result, investors will be aware of their tax obligations, and stakeholders are advised to consult with tax professionals to ensure proper compliance with these tax rules.
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