A group of Congress members in the US have sent a letter to the Internal Revenue Service (IRS) asking for a fairer tax on staking rewards, a Coin Center letter revealed Tuesday.
However, a tax must be levied when such rewards are sold, instead of acquired, said the Congressmen.
Coin Center, a non-profit, Washington DC-based advocacy firm, contests for better regulation around cryptocurrencies and blockchain technology. Its work has shaped some of the legal narratives around cryptocurrencies in the US today.Don’t tax crypto rewards
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 on the latter.
Yesterday’s effort is another is a series of pro-crypto letters to different policymakers in the US government. The thinktank, Coin Center, believes poor policymaking has undermined cryptocurrencies. Moreover, much of the legal narrative is based on the negatives instead of the benefits, the body says.Inside the US Congress. They could soon discuss why crypto rewards must be exempt from taxes.
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: (1) she’s been paid some revenue and therefore has income to report, or (2) she’s created some valuable item directly through her labor, the letter noted.
Congressmen noted he first of those points is “essentially like being paid a wage for a job,” while the second is essentially like “growing valuable crops on one’s own lands or extracting minerals from one’s own mines.”
Meanwhile, 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.