Two American legislators have put forth a proposal to address the tax treatment of cryptocurrency staking rewards. Representatives Wiley Nickel, a Democrat from North Carolina, and Drew Ferguson, a Republican from Georgia, jointly introduced the Providing Tax Clarity for Digital Assets Act on May 1. The purpose of the bill is to clarify the taxation of staking rewards by ensuring that they are only taxed once, at the time of sale, in order to prevent double taxation.
Under this bill, staking rewards would be classified as created property according to the U.S. tax code. Representative Ferguson emphasized that the legislation aims to provide the much-needed tax clarity for the industry, establish the United States as a leader in digital asset tax treatment, and promote innovation and business within the country.
Staking rewards are incentives earned by individuals who actively participate in securing and validating a blockchain network by holding cryptocurrency. The issue of how to tax these rewards has been a source of confusion for many investors, as it is unclear whether they should be taxed upon receipt or when sold.
The proposed legislation is in response to a previous ruling by the Internal Revenue Service, which stated that crypto investors earning staking rewards must include the value of those rewards in their gross income when filing taxes.
The bill has received positive feedback from the wider community, particularly regarding the idea of taxing block rewards from proof-of-work or proof-of-stake networks only at the time of sale. Taha Abbasi, the Chief Technology Officer at staking technology Infrastructure provider Ferrum Network, commended the initiative by Representatives Ferguson and Nickel, expressing optimism that the bill will help solidify the U.S. as a leader in both technical and legal innovation within the digital asset space.
Sheila Warren, the CEO of the Crypto Council for Innovation, also praised the legislation, describing it as “right on point” and stating that it provides the clarity that is necessary in this area.
Both Representatives Nickel and Ferguson have been vocal about the importance of establishing clear regulatory frameworks for digital assets. Representative Nickel was instrumental in advancing the Financial Innovation and Technology Act last year, which aims to create a regulatory framework for digital assets to protect consumers and foster innovation.
The introduction of this bill closely followed the fourth Bitcoin halving event on April 19, which reduced Bitcoin mining rewards from 6.25 BTC to 3.125 BTC per block.