The IRS tax rules are trapping ordinary stakers in a dilemma of 'phantom income', while a storm of reform is brewing from Capitol Hill.
A typical Ethereum staker recently lamented on social media: 'I received 2 ETH in staking rewards, but before I could sell, I have to pay taxes, and I have no cash income to cover the tax bill!' This situation is a true reflection of the absurdity of the current U.S. crypto staking tax policy.
With the push from Indiana Senator Todd Young and others, U.S. cryptocurrency tax policy is reaching a critical turning point. This debate is not just about technical details; it will determine whether the U.S. is weighed down by tax rules or can march into the blockchain revolution unencumbered.
01 Tax rules are seriously outdated, and stakers become victims of 'phantom income.'
The current IRS tax guidance counts cryptocurrency asset staking rewards as taxable events 'when received' rather than 'when sold or exchanged,' which creates serious inequities.
Imagine that you have planted an orchard, and when the fruit trees have just begun to bear fruit and are far from mature enough to be sold, tax officials come to require you to pay taxes on the fruit that might be sold in the future. This is the dilemma currently faced by stakers in the United States.
The staking income tax guidance issued by the IRS in 2023 (Notice 2023-14) formally established the position that when taxpayers have 'dominion and control' over staking rewards, they must be taxed as ordinary income. This policy completely ignores the uniqueness of digital assets, as the value of these rewards may fluctuate significantly or even drop to zero before actual sale.
02 Lawmakers begin to take action; tax reform receives bipartisan support
It is commendable that lawmakers on Capitol Hill have noticed this issue. Indiana Senator Todd Young has written to the U.S. Treasury, requesting a review of the staking income tax guidance published in 2023.
More groundbreaking is that a bipartisan group of House lawmakers, including Ohio Republican Representative Max Miller and Nevada Democratic Representative Steven Horsford, is drafting a cryptocurrency tax bill named the (Digital Asset Equality Act).
This draft proposes a compromise: allowing taxpayers to defer taxes on staking and mining income for five years, after which they will be taxed as ordinary income based on fair market value.
At the same time, the cryptocurrency tax bill introduced earlier this year by Senator Cynthia Lummis is more radical, advocating for no taxes to be levied until rewards are sold. This indicates that the support for cryptocurrency tax reform in Congress is growing.
03 Why is staking tax reform crucial?
On the surface, this may seem like a debate over technical tax details. However, in reality, it relates to the competitiveness and innovative capacity of the U.S. blockchain industry.
First, unfair tax policies will force projects and capital to flow overseas. There are already signs that regulatory ambiguity is prompting businesses to relocate to jurisdictions with more favorable environments, such as the EU and Asia.
Secondly, reasonable tax rules are essential to encourage ordinary participants to support network security. The security of proof-of-stake blockchains relies on widespread token holder participation in staking. If tax rules are unfavorable to staking, the security of the entire network will be compromised.
Finally, this concerns the United States' voice in the development of the next generation of the internet. As Senator Cynthia Lummis warned, 'regulatory ambiguity is prompting businesses to relocate to the EU and Asia, urging the Treasury and IRS to clarify the system quickly.'
04 My personal view: Reform is inevitable, but the road may be winding
As a cryptocurrency analyst who has experienced multiple market cycles, I believe that staking tax reform is imperative, but the process may take longer and be more tortuous than the community expects.
The IRS's position on taxing 'phantom income' is legally flawed. The case of Jarrett v. United States has demonstrated this, and although the case was ultimately dismissed for procedural reasons, the core legal issues remain unresolved.
The deferred tax proposal currently being discussed in Congress is a pragmatic mid-term solution, but it remains a compromise. The ideal solution should determine the tax point at the time of asset disposal, which is more consistent with traditional investment tax treatment.
I predict that within the next year, we will see some form of legislation or guidance issued, but it may not be the most ideal version. The cryptocurrency industry needs to continue to show a unified voice to help policymakers understand the importance of reasonable tax rules.
As more large exchanges like Kraken secretly submit IPO drafts, and traditional financial giants like BlackRock continue to increase their allocation to cryptocurrency assets, the pressure on U.S. policymakers is mounting. The modernization of tax rules is no longer a question of 'if' but rather 'when' and 'how.'
As the EU has completed preparations for the digital euro, and the Marshall Islands has launched the world's first blockchain-based universal basic income program on the Stellar chain, the U.S. lagging behind in cryptocurrency tax policy may mean losing the edge in the next round of digital financial competition.
The bell of change has already rung. Only with a reasonable tax system can the United States truly unleash the potential of blockchain technology, rather than bind innovators with outdated rules.
What do you all think? Have you ever faced troubles due to the U.S. cryptocurrency tax system? Feel free to share your experiences and views in the comments, and don't forget to like and follow this account@崎哥说币 #美国非农数据超预期 $BTC
