Crypto Regulation Shakeup: Staking Taxes Targeted as Fed Teases New Banking Model

Regulators are sharpening their knives, and crypto's passive income darling is on the menu. This week's regulatory rumble puts staking rewards squarely in the tax crosshairs while the Federal Reserve whispers about building a new financial lane just for digital assets.

The Staking Tax Grab

Forget 'set it and forget it.' Tax authorities are waking up to the billions generated from proof-of-stake networks, and they want their cut. The debate isn't about if staking rewards are taxable—that ship has sailed—but how and when. Is it income the moment it's validated? Or only when you sell? That distinction could mean the difference between a manageable bill and a liquidity crisis for long-term holders. One regulator's 'clarification' is another investor's nightmare.

A Fed-Built On-Ramp?

In a surprising twist, the same institution known for cautious whispers about 'speculative assets' is now hinting at a tailor-made banking framework for crypto. The Fed's not endorsing your favorite meme coin, but it is acknowledging the system's permanence. The potential model? Special-purpose banking charters with fortified capital requirements and real-time transaction monitoring. It's the financial equivalent of a high-security petting zoo: you can interact with the animals, but the walls are very, very high.

This regulatory one-two punch reveals the new battle lines. Governments are moving past simple bans toward sophisticated capture—taxing the yields and corralling the infrastructure. The old guard wants to integrate crypto into the existing system, draining its revolutionary potential in the process. After all, what's the point of building a decentralized future if it just feeds the same old tax machine and banking giants? The race is on: will innovation outpace integration, or will finance's old playbook absorb yet another disruptor?

Lawmakers Renew Push on Staking Tax Treatment

A bipartisan group of 18 US House lawmakers has urged the Internal Revenue Service to revisit how crypto staking rewards are taxed, arguing that current interpretations amount to double taxation and discourage participation in blockchain networks.

A bipartisan group of 18 US House lawmakers is calling on the Internal Revenue Service to revisit how crypto staking rewards are taxed.#Crypto #Taxhttps://t.co/wJTvU94x7r

In a letter sent to acting IRS commissioner Scott Bessent, the group—led by Representative Mike Carey—called existing guidance “burdensome” and asked for a review before 2026.

Under prevailing interpretations, staking rewards are treated as taxable income when received, based on their market value at that time, and are then taxed again if sold at a gain.

Lawmakers argue this approach fails to reflect actual economic profit, particularly in volatile markets where token prices can fluctuate sharply between receipt and sale. “This letter is simply requesting fair tax treatment for digital assets,” Carey said, adding that taxing rewards only when sold WOULD be a meaningful step toward clarity.

The renewed pressure highlights a broader debate over whether staking should be treated like earned income or more akin to unrealised asset appreciation—an issue that remains unresolved as staking becomes more central to proof-of-stake networks.

Fed Explores New Access to Payment Rails

Separately, the Federal Reserve opened a consultation that could reshape how crypto and payment-focused firms interact with the US banking system.

The Fed is seeking public comment on a proposed “payment account,” a limited-use central bank account designed to sit alongside—but remain distinct from—the traditional master account used by banks.

@federalreserve seeks public feedback on a new “payment account” that could give crypto firms limited access to U.S. payment rails without full master accounts#FederalReserve #CryptoBankshttps://t.co/GBjwtkWS2n

The proposal shows growing strain on the Fed’s existing framework as fintechs and crypto firms seek direct access to payment rails without engaging in lending or deposit-taking.

By creating a tailored account model, the Fed appears to be weighing how to accommodate new business models while preserving safeguards tied to full-service banking.

The 45-day comment period, following publication in the Federal Register, suggests regulators are still in an exploratory phase. But even considering such accounts signals a recognition that denying access altogether may no longer be sustainable as digital payments and tokenised settlement systems expand.

SEC Targets Fraud Masquerading as Innovation

While tax and banking debates focused on structural reform, enforcement remained firmly in play. The U.S. Securities and Exchange Commission charged a network of alleged fake crypto trading platforms and so-called AI investment clubs, accusing them of orchestrating a $14 million retail fraud.

The SEC charged fake crypto platforms and AI-branded investment clubs over a $14 million retail investor scam.#SEC #Cryptohttps://t.co/ssD0ROvZ2e

According to the SEC, entities including Morocoin Tech Corp., Berge Blockchain Technology Co. Ltd., and several AI-branded investment clubs used social media advertising, messaging apps, and fabricated products to lure investors into what regulators described as an “investment confidence scam.”

The case shows persistent regulatory concern: while legitimate crypto firms push for clearer rules, bad actors continue to exploit HYPE around AI and digital assets to target retail investors. For regulators, enforcement actions like this remain a key justification for maintaining a hard line on consumer protection.

Arizona Tests the Limits of State-Level Crypto Tax Policy

At the state level, Arizona lawmakers introduced a fresh attempt to carve out a more permissive tax environment for digital assets. Proposals backed by State Senator Wendy Rogers would exempt VIRTUAL currency from certain taxes and bar local governments from imposing fees on blockchain node operators.

Arizona lawmakers introduce new bills to exempt cryptocurrency from taxes and block cities and counties from imposing local crypto or blockchain fees.#Arizona #CryptoTaxes https://t.co/uSfYHHZHWo

One bill would remove virtual currency from state taxation, while another would prevent cities and counties from taxing node operations. A separate constitutional amendment would explicitly exclude crypto from property tax—but would require voter approval in November 2026.

The effort highlights the tension between state-level experimentation and broader fiscal realities. Arizona currently levies a flat 2.5% income tax and a transaction privilege tax that averages above 8.5% once local rates are included, making a fully “tax-free” status politically and fiscally complex.

A Regulatory Picture Still in Motion

This week’s developments illustrate a regulatory landscape in transition. Policymakers are increasingly focused on aligning crypto with existing financial principles—fair taxation, controlled access to payment systems, and investor protection—while still wrestling with how far existing rules can stretch.

As staking, tokenised payments, and crypto-native infrastructure mature, the pressure on regulators to MOVE from interim fixes to durable frameworks is only set to grow.