U.S. Congress appeals for zero tax on crypto staking rewards

A group of Congress members in the US have sent a letter to the Internal Revenue Service asking for zero tax on staking rewards, a Coin Center letter revealed Tuesday.

A tax must be levied when such rewards are sold, instead of acquired, said the Congressmen.

The letter calls for taxing staking rewards for validators in proof-of-stake networks only when they sold on exchanges, instead of when they were received.

This means if a user receives ten units of a crypto reward but sells just one; they must be taxed only.

When a validator on a proof of stake network creates a reward for maintaining that network's blockchain, tax law could treat her proceeds in two alternative ways: she's been paid some revenue and therefore has income to report, or she's created some valuable item directly through her labor, the letter noted.

As cryptocurrency activities are relatively new, there are no established precedents to adequately access how mining or staking rewards must be taxed, said Coin Center.

Treating these rewards as income "Creates a tremendous administrative burden on both the taxpayer and the Service," the letter states.

"Any block reward from a permissionless cryptocurrency network is most accurately described as the creation of value through one's own capital and labor rather than the receipt of value from an employer."

The letter concludes that block rewards be treated similarly to and taxed like crops, minerals, livestock, artwork, and assembly-line widgets, i.e. at the time of sales, not creation.

The letter has been received warmly by staking-based cryptocurrencies.