Crypto Stakers on Edge as US Lawmakers Rush to Fix Tax Rules Before 2026
US Lawmakers Push Urgent Reform of Crypto Staking Taxes Ahead of 2026 Deadline
Washington, D.C. — A growing bipartisan effort in the United States Congress is accelerating plans to overhaul how cryptocurrency staking rewards are taxed, signaling what could become one of the most consequential digital asset policy shifts in years. With the 2026 tax framework looming, lawmakers warn that failure to act could impose unfair financial burdens on millions of Americans participating in proof-of-stake blockchain networks.
At the center of the debate is a long-standing concern over how the Internal Revenue Service treats staking rewards. Under guidance introduced in 2023, staking rewards are taxed as ordinary income at the moment they are received, even if the tokens have not been sold or converted into cash. Critics argue that this approach effectively results in double taxation and places the United States at a disadvantage in the rapidly evolving global crypto economy.
A bipartisan coalition of 18 members of the House of Representatives, led by Ohio Republican Mike Carey, has formally urged the Treasury Department and the IRS to reconsider the current tax treatment. Their argument is straightforward: staking rewards should be taxed only when they are sold, not when they are created.
Why Crypto Staking Taxes Are Under Fire
Staking is a core function of proof-of-stake blockchain networks such as Ethereum, Solana, and Cardano. Participants lock up digital assets to help secure the network and validate transactions, earning rewards in return. Unlike traditional income, these rewards are generated by the protocol itself rather than paid by an employer or counterparty.
Lawmakers argue that taxing staking rewards at the moment they are received ignores this distinction. In their letter, they compare staking rewards to newly created property, such as crops grown by a farmer or minerals extracted by a miner, which are typically taxed only when sold.
“The current policy treats staking participants as if they are receiving cash wages, which is simply not how these systems function,” the lawmakers wrote, according to reporting cited by hokanews. “This creates a punitive tax structure that discourages participation and innovation.”
The Double Taxation Problem
The primary criticism centers on what lawmakers describe as double taxation. First, staking rewards are taxed as income upon receipt. Later, when the tokens are sold, any appreciation in value is subject to capital gains tax.
This structure can create significant financial strain, particularly during periods of market volatility. If a token’s price falls after rewards are received but before taxes are paid, participants may owe more in taxes than the asset is worth at the time of sale.
Retail investors are especially vulnerable. Unlike institutional players, individual stakers may not have the liquidity needed to cover tax bills on unsold tokens. Lawmakers argue that this reality undermines the principle of fairness in the tax code.
Impact on US Competitiveness
Beyond individual taxpayers, lawmakers are concerned about broader economic consequences. Proof-of-stake networks rely on widespread participation to maintain security and decentralization. If tax policies discourage validators and developers from operating in the United States, innovation may migrate elsewhere.
Countries such as Singapore, Switzerland, and parts of the European Union have adopted clearer or more favorable tax frameworks for crypto participants. Advocates of reform warn that without changes, the US risks falling behind in blockchain infrastructure development.
“Tax policy should not push builders offshore,” one policy analyst told hokanews. “This is not about special treatment for crypto. It is about aligning taxation with economic reality.”
New Legislative Momentum Builds
In parallel with the Carey-led initiative, Representatives Max Miller of Ohio and Steven Horsford of Nevada have introduced draft legislation known as the Digital Asset PARITY Act. The proposal aims to modernize crypto taxation by addressing both staking and mining rewards.
The bill would allow a five-year tax deferral on rewards earned through staking or mining, meaning participants would not owe taxes until the assets are sold. Supporters say this approach mirrors how other forms of property creation are treated under US tax law.
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The proposal also includes a $200 exemption for transactions involving stablecoins. The goal is to enable everyday crypto use, such as small purchases and peer-to-peer transfers, without triggering complex tax reporting requirements.
Lawmakers behind the bill argue that without such exemptions, the administrative burden of tracking small transactions discourages legitimate use of digital currencies for daily commerce.
Why 2026 Matters
The urgency surrounding the issue is tied to upcoming changes in federal tax policy scheduled for 2026. Several provisions enacted under earlier tax reforms are set to expire, potentially reshaping how digital assets are regulated and taxed.
Lawmakers fear that without proactive legislation, crypto users could face increased tax exposure under outdated rules. With millions of Americans now holding or staking digital assets, the stakes are higher than ever.
“This is not a niche issue anymore,” said one congressional aide familiar with the discussions. “Crypto participation has gone mainstream, and the tax code has not kept up.”
A Rare Bipartisan Opportunity
One notable aspect of the push for reform is its bipartisan nature. In an era of political polarization, crypto tax reform has emerged as a rare area of cross-party agreement.
Democrats emphasize consumer protection and fairness, while Republicans focus on innovation and economic competitiveness. Both sides agree that clarity and consistency are urgently needed.
Industry groups have welcomed the momentum, describing it as a sign that policymakers are beginning to understand the technical realities of blockchain networks.
“This could be the first major crypto policy win in Congress,” said a blockchain policy advocate quoted by hokanews. “It shows that lawmakers are listening.”
Challenges Ahead
Despite growing support, the path to reform is not guaranteed. Tax policy changes require coordination between Congress, the Treasury Department, and the IRS. Budgetary concerns and broader debates over fiscal policy could complicate progress.
Skeptics also warn that overly generous tax treatment could open the door to abuse. Regulators will need to balance innovation with safeguards against tax avoidance and fraud.
Still, proponents argue that the current system is unsustainable. As proof-of-stake networks become the dominant model for blockchain infrastructure, they say, tax rules must evolve accordingly.
What Comes Next
In the coming months, congressional committees are expected to hold hearings on digital asset taxation. Lawmakers hope to incorporate staking tax reform into broader legislative packages before the 2026 deadline.
If successful, the changes could reshape how millions of Americans interact with crypto, lowering barriers to participation and providing long-awaited clarity.
For now, the debate continues. But with bipartisan momentum building and industry pressure mounting, crypto staking tax reform may finally be approaching a turning point.
As one lawmaker put it, “If we want the future of blockchain to be built in America, our tax laws need to reflect how this technology actually works.”
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