New US bill aims to eliminate double taxation on crypto staking rewards

Two US lawmakers have proposed a bill clarifying the taxation framework for cryptocurrency staking rewards.

Bipartisan lawmakers Reps. Wiley Nickel, D.N.C. and Drew Ferguson, R-Ga. introduced Providing Tax Clarity for Digital Assets Act on May 1 to clarify how staking rewards will be taxed. The law proposes to avoid double taxation by taxing staking rewards only at the time of sale.

The bill would define staking rewards as property created under U.S. tax law.

“The Providing Tax Clarity for Digital Assets Act would provide desperately sought tax clarity to the industry, establish United States leadership in digital asset tax enforcement, and foster innovation and trade in the United States,” said Representative Ferguson.

Staking rewards are earned by cryptocurrency holders who actively participate in securing and verifying a blockchain network, receiving additional tokens as incentives. The complexity arises because taxation remains unclear, and many investors are confused about whether rewards will be taxed upon receipt or when sold.

The proposed law is a response to an earlier decision by the Internal Revenue Service. Crypto investors who earn staking rewards must include the value of those rewards in their gross income when filing taxes, according to the tax watchdog.

The proposed legislation has received positive reactions from the wider community. The idea of ​​taxing block rewards from Proof-of-work or Proof-of-Stake networks only at the time of sale has been met with enthusiasm. Taha Abbasi, Chief Technology Officer of staking technology infrastructure provider Ferrum Network, expressed his optimism in his statement to crypto.news:

“We appreciate the initiative of U.S. Congressman Drew Ferguson (R-GA) and Congressman Wiley Nickel (D-NC) to facilitate clarity in Tax Regulations for digital assets, particularly those related to staking technologies. […] “We believe this bill will ensure that the United States is not only a leader in technical innovation, but also in legal and regulatory innovation that will support our ever-evolving technical ecosystem.”

Meanwhile, Crypto Innovation Council CEO Sheila Warren called the legislation “just right,” adding that the bill would offer “needed clarity.”

Both Rep. Nickel and Rep. Ferguson advocated for the implementation of clear regulatory frameworks for digital assets. Last year, Rep. Nickel played a key role in introducing the Financial Innovation and Technology Act, which aims to create a regulatory framework for digital assets designed to protect consumers and encourage innovation.

The bill closely follows the fourth Bitcoin halving event on April 19, which reduced Bitcoin mining rewards from 6.25 BTC to 3,125 BTC per block.