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Confusion on Crypto "Staking" May Lead to Reporting Woes

Law360

26 Jun 2020

Rebecca Balinskas spoke to Law360 about how a lack of IRS guidance on cryptocurrency "staking," in which a user receives virtual currency in exchange for holding tokens for a period of time, could cause confusion over when to report the currency as being obtained for tax purposes.

According to Rebecca, receiving staking coin from simply holding cryptocurrency in a wallet may further complicate tax reporting because the coin may be more like dividend interest than miscellaneous income.

If a holder is passively involved and just keeps cryptocurrency in a wallet, the staked cryptocurrency may be perceived the same way as money held in a bank in exchange for a bonus, which would look more like a dividend, she said, adding that if a holder is more actively involved in the creation of the coin, however, that may look more like mining and be perceived as ordinary income.

"This is why IRS guidance would be really helpful," Rebecca said.

Read the full article.

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