Washington’s Crypto Staking Breakthrough: Momentum Builds to End Double Taxation

Lawmakers are finally taking aim at one of crypto's most persistent headaches—the taxman hitting staking rewards twice.

The Double-Dip Dilemma

Imagine earning yield on your digital assets, only to get taxed when you receive the tokens and taxed again when you sell. That's the current reality for U.S. crypto stakers, a quirk in the tax code that treats newly minted staking rewards as immediate income. It's like getting taxed on the wheat when it sprouts and again on the bread you bake—a system only a bureaucrat could love.

Capital Hill's Crypto Calculus

The push isn't coming from crypto Twitter alone. Bipartisan support is coalescing around legislation that would defer taxes until those staking rewards are actually sold or exchanged. Proponents argue the current framework punishes long-term participation in blockchain networks and puts U.S. investors at a global disadvantage. Because nothing says 'innovation hub' like chasing your best tech minds to friendlier jurisdictions.

The Regulatory Reckoning

This isn't just about fairness—it's about clarity. The crypto industry has operated under regulatory fog for years, with staking's tax treatment being particularly murky. Clear rules could unlock billions in currently sidelined capital and finally give institutional investors the certainty they need to dive in. Wall Street might finally understand crypto once there's a proper tax form for it.

The Bottom Line

If passed, this fix could trigger the next wave of crypto adoption by making network participation genuinely rewarding instead of punitive. It would recognize staking for what it is—a service to secure blockchain networks—not some speculative lottery ticket. Because in finance, the only thing better than making money is keeping more of what you make.

Lawmakers Press IRS Ahead of 2026

In a letter led by Representative Mike Carey, lawmakers asked whether any administrative barriers stand in the way of updating staking guidance before the end of the year. They argue that taxing rewards only at the point of sale WOULD better capture actual economic gain while reducing reporting complexity.

The group also warned that current rules may discourage staking participation, which plays a critical role in securing proof-of-stake blockchains and maintaining network resilience.

The timing is deliberate. Several tax provisions are set to expire in 2026, and lawmakers want clarity on staking before broader tax debates take precedence. They also noted that prolonged uncertainty could invite unfavorable court rulings that lock in interpretations through precedent rather than policy.

The PARITY Act and Broader Crypto Tax Reform

Alongside the IRS letter, Representatives Steven Horsford and Max Miller have introduced a discussion draft known as the Digital Asset PARITY Act.

The proposal takes a wider view of crypto taxation, including a de minimis exemption for regulated stablecoin payments used in everyday transactions. Small gains or losses from these payments would generally not be taxed, mirroring existing treatment for low-value foreign currency exchanges.

For staking and mining, the PARITY Act stops short of eliminating immediate taxation but proposes allowing taxpayers to defer income recognition for up to five years.

Supporters say this could provide interim relief while lawmakers work toward permanent clarity. The bill also extends wash-sale rules and certain securities tax provisions to actively traded digital assets, aiming to curb abuse without expanding loopholes.

Together, these efforts signal growing consensus in Congress that crypto taxation needs refinement rather than piecemeal fixes. While no changes are guaranteed, the push to address staking double taxation reflects a shift toward more technical, outcome-focused policymaking.

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For investors and network participants, the next year could determine whether staking remains burdened by uncertainty or moves toward a clearer, more predictable tax framework.

Cover image from ChatGPT, ETHUSD chart from Tradingview