In a new development, the Internal Revenue Service (IRS) has ruled that any rewards obtained from cryptocurrency staking are subject to tax. According to Revenue Ruling 2023-14, a cash-method taxpayer that stakes cryptocurrency native to a proof-of-stake blockchain must pay tax on additional cryptocurrency they receive as rewards when validation occurs.
The ruling goes on to define cryptocurrencies as “convertible virtual currencies”. It provides a detailed description of the blockchain technology that underpins cryptocurrencies, in addition to elaborating on the process whereby the integrity of a blockchain is maintained through validation.
This development by the IRS carries significant implications for participants in the blockchain and cryptocurrency environments, who must now approach cryptocurrency staking mindful of potential tax liabilities.
The IRS ruling and its potential impact is one to monitor closely. It represents a further stride in the ongoing dialogue around the legislative and regulatory treatment of cryptocurrencies.