The Internal Revenue Service issued new guidelines on July 31, outlining its stance on taxing cryptocurrency staking rewards.
The new directives stipulate that taxpayers who engage in staking of cryptocurrency native to a proof-of-stake blockchain and subsequently receive additional cryptocurrency units as validation rewards are required to include the value of these rewards in their gross income within the same taxable year of receipt.
The rule is specific to cash-method taxpayers. It determines that the exact value to be reported is the fair market value of the cryptocurrency at the point when the taxpayer establishes “dominion and control” over the rewards. This usually coincides with the ability to sell, exchange, or otherwise transact with the received units.
Digital representation of value
The Internal Revenue Code defines a digital asset as a “digital representation of value recorded on a cryptographically secured distributed ledger or similar technology.” This includes,
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