Staking Tax Guidance is Setting Ground Rules, but Gaps Still Exist for Investors
The Internal Revenue Service (IRS) of the US has stated that crypto investors must report staking rewards as taxable income. If a taxpayer stakes crypto on a proof-of-stake blockchain and receives rewards, the fair market value of those rewards should be included in their gross income for the taxable year when they gain control over them. The fair market value is determined at the time the taxpayer gains control over the validation rewards, according to the agency's public administrative ruling. The same rule applies if a taxpayer stakes crypto on a proof-of-stake blockchain through an exchange and receives additional units as rewards. Staking involves individuals participating in the validation and verification of transactions on a proof-of-stake blockchain network and the participant receives rewards in the form of extra tokens for helping to keep the network secure and verifying transactions. Typical returns for staking are around 6% to 12% across platforms and DeFi protocols. This legal guidance follows US regulators taking action against staking services provided by crypto exchanges, considering them as unlawfully offered securities. The Securities and Exchange Commission (SEC) targeted Binance.US and Coinbase's staking-as-a-service programs, alleging violations of securities laws. Kraken also faced two charges related to its staking products and settled both cases, paying $30 million and discontinuing the staking program earlier this year. The IRS's ruling clarifies the tax implications for investors engaging in staking activities, making it essential for them to report and pay taxes on their staking rewards. We still don't have guidance on delegating, slashing, MEV, etc., but it's a step in the right direction.
One VC says this crypto winter is the highest low we've had and is excited about this current environment and where we are going. Alok Vasudev is the co-founder of Standard Crypto, a VC firm that has been investing across various blockchain verticals since 2019. In this podcast, Vasudev explains why he believes the crypto industry is in a better position now than ever before, and how to spot the best opportunities during bear markets. Frank Chapparo asks a number of logical questions about market maturity, where folks are creating and finding Alpha, Web3 social topics, blockchain gaming, and Standard Crypto's thesis. Alok touches on a number of ranging topics in a little over 30 mins. Definitely worth a listen and gives those folks within the industry some encouragement for all the stagnant activity over the past 12 months.
What is happening to the prices of everyone's NFTs? The 2023 NFT Annual Report by NFTGo has analyzed all the unique apes, penguins, and rocks to share where the flows are going within the space. It provides insights into top-performing NFT projects and evaluates key aspects such as market capitalization, volume, sales, and holder profiles. The report covers ten NFT categories and predicts future trends. It reveals wealth disparity among users and increased liquidity in homogeneous projects. Market 'whales' are studied, including their behaviors, entries, exits, and investment preferences. By collaborating with industry influencers, NFTGo's insights for the 2023 NFT market, the report emphasizes the importance of understanding the data and tracking whale activities. This report should be a decent guide to navigating the chaotic NFT markets by providing a North Star for those who don't play in the space.
KPMG published a paper arguing that bitcoin is an ESG (Environmental, Social, and Governance) asset, countering claims that it is harmful to the environment and social goals. The report acknowledges that bitcoin is often misunderstood but emphasizes its beneficial use cases and value for society. While the report does not introduce new information for long-time bitcoin followers, its significance lies in the endorsement from a prominent consultancy. Regarding its impact on the environment, the report credits bitcoin with promoting the development of renewable energy sources and stabilizing power flow through miners' demand-response programs. It also notes that the climate impact of cryptocurrency is relatively small compared to other sectors like tourism and consumer electronics. On the social front, the report highlights how bitcoin was used to fund the military in Ukraine during a global effort, and it points out that bitcoin can provide financial inclusion in regions where citizens lack access to banking services. However, it acknowledges that cryptocurrency has facilitated the growing cybercrime of ransomware. Finally, the report mentions that Texas is the largest producer of wind and solar power in the U.S., with excess wind power capacity that bitcoin can help utilize. It is a very interesting report and timely for the industry.
What kind of skills do employees need to qualify for jobs in digital asset fund administration?
MG STOVER PLACEMENT SERVICES VIDEO SERIES
How is MG Stover helping the market find more specialized personnel in the digital asset market?
The content and information aggregated in this newsletter is publicly available and shared by us to keep our clients and professional network up to date with digital asset / crypto industry news, exhibitions and events. We do not use, repurpose or represent authority over any licensed images or content and have no conflicts of interest with regards to the production of this bulletin or the shared content herein. This is provided as an optional newsletter that you may unsubscribe from. We do not share any of your contact details with any other company or institution without prior consent.
Standard Custody & Trust Co.
PolySign, Inc., 650 5th Ave, 14th Floor, New York, NY, 10019
