US Lawmakers Introduce Bill on Staking Taxation

Two US congressmen have introduced a bill to regulate the taxation of cryptocurrency staking income.

The document, authored by Wiley Nickel and Drew Ferguson, is titled the “Digital Asset Tax Clarity Act.”

“The US approach to digital asset rewards is overly complicated, leading to investor confusion, double taxation, and the relocation of American businesses abroad. The law will provide the industry with much-needed tax clarity […]”, stated Ferguson. 

Under the proposed rules, staking rewards would be taxed only at the point of sale to prevent double payments.

The bill was introduced in response to amendments to the IRS rules published in August 2023. The agency proposed including staking rewards in the calculation of taxable income from coins locked in Proof-of-Stake networks. 

Citizens would need to report the “fair market value” of staking rewards in their annual returns. The rules do not consider whether the investor sold the received assets.

The new bill aims to address this issue by accounting for cryptocurrency staking income only after actual realization. 

The proposal was supported by the Proof-of-Stake Alliance, which called it a “reasonable clarification of existing law.”

“The document promotes tax fairness and compliance by confirming that verification rewards are taxed only upon sale or exchange, rather than twice—first upon acquisition and then again upon sale,” noted representatives of the Proof-of-Stake Alliance. 

In May 2023, the administration of US President Joe Biden proposed a 30% tax on cryptocurrency mining. The initiative aims to minimize the impact on climate change. 

Marathon Digital CEO Fred Thiel expressed concern that such an approach would drive the industry to offshore jurisdictions.