US Lawmakers Push to Fix Crypto Staking Taxes Before 2026 Deadline

The US lawmakers are hastening the process of reforming the taxation of crypto staking by the year 2026. The change in the taxation of staking rewards has already been petitioned by a bipartisan coalition of 18 members of the House of Representatives headed by Mike Carey. They claim that the existing system does not fully reward the participants in the proof-of-stake systems.

The Essential Point of Contention: Double Taxation

The controversy revolves around an IRS regulation that taxed as ordinary income as soon as a user receives staking rewards in 2023. According to lawmakers, this amounts to dual taxation. This structure is not similar to the traditional asset treatment and does not encourage long-term participation. The practice is similar to that of other newly acquired assets. It also goes in line with how miners used to plead earlier on the clarity of taxes even before selling mined tokens.

The letter cautions that the existing tax policy is detrimental to retail users and also derails the US competitiveness in blockchain innovation. Proving-of-stake networks are based on large-scale participation as security. Lawmakers are of the opinion that the punitive tax regulations drive developers and validators out of the country, undermining the local crypto ecosystem.

Simultaneous Lawmaking Processes Gather Steam

Meanwhile, Representatives Max Miller and Steven Horsford have put forward the draft Digital Asset PARITY Act. The proposal intends a five year tax deferral on staking and mining rewards. It also has a $200 exemption on transactions in stablecoins to facilitate daily cryptocurrencies without burdening the IRs.

Lawmakers are indicating a sense of urgency with 2026 in the offing. The absence of reform could put millions of crypto users under the increased tax burden, which the lawmakers consider entirely unrelated to the economic reality. The bi-partisan tone implies that the tax reform may be one of the first significant crypto policy reforms to see the light of day in Congress.