The American Internal Revenue Service IRS made an announcement regarding investors who stake in altcoins the other day. The IRS underlined that taxpayers will be taxed on their fair value of earnings from staking altcoins. The institution used the following statement about the level of taxation of cryptocurrencies, whose prices are constantly changing:
“Fair market value is determined by the date and time the taxpayer receives staking income.”
Officials noted that this rule is the same for revenues generated from staking on Proof-of-Stake (PoS) networks through exchanges.
What is Altcoin Staking? What Does It Do?
The passive income that investors earn by locking altcoins into the network is called staking. Crypto investors get involved in the system by locking some tokens into blockchain networks that work with the PoS system. Individuals who stake altcoins earn a certain amount of income as a result of helping to verify transactions.
While rewards vary, DeFi protocols typically promise between 6% and 12% annual revenue.
This legal guidance from the IRS followed staking pressure from US government agencies on their stock markets. The SEC has recently filed suit against the staking schemes of exchanges such as Binance.US and Coinbase. Kraken exchange has agreed with the SEC to close its staking program already.
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