On August 4, four representatives of the U.S. Congress wrote to the Internal Revenue Service (IRS) asking the tax authority not to overtax the rewards of block chains with Proof-of-stake (PoS) protocol.
Explaining the difference in energy consumption between PoS and Proof-of-Stake (PoW) blockchains like Bitcoin, Representatives Tom Emmer (R-MN), Darren Soto (D-FL), David Schweikert (R-AZ) and Bill Foster (D-IL) wrote that the IRS may be overestimating the gains:
“We believe that the true earnings of Crypto Cash on these tokens should be taxable. However, it is possible to tax staking rewards while such income may exaggerate the actual earnings of taxpayers from participating in this new technology.
8 U.S. congressional representatives send letter to IRS asking for more clarity on cryptotax
Industry response and clarity on PoS
PoS is a growing concern for American taxpayers. The Proof of Stake Alliance (PoSA), a lobbying group, responded, saying they applauded the letter, which they also helped write.
Most of the major crypto currency exchanges in the U.S. have limited options for staking, possibly because exchanges like Coinbase and Kraken promote their work to make taxation easier for U.S. users.
A bill to exempt small cryptotransactions from taxation returns to the U.S. Congress
A blockchain and procrypto-currency working group in Congress
The four signatories to the bill are all members of the Congressional Blockchain Working Group and are known for their interest in cryptomonies. They end their letter by describing their “continued efforts for future-proof policies and fiscal regulations that will allow safeguards, but also ensure that innovation is not diverted elsewhere.
Several of the signatories of today’s letter wrote a similar statement to the IRS in December asking for more guidance on taxing hard bifurcations and airdrops. Schweikert is the author of a bill he introduced in January that addresses the overtaxation of crypto currencies, specifically those used in personal transactions.