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New Report on Tax Treatment of Cryptocurrency Block Rewards Published

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The foreign law specialists of the Law Library of Congress recently completed a multinational report titled Taxation of Cryptocurrency Block Rewards. The report surveys the tax treatment of new tokens obtained by cryptocurrency mining or staking, often known as “block rewards,” in 31 countries around the globe. It also addresses the tax implications of cryptocurrency tokens acquired through activities like airdrops and hard forks (also referred to as “chain splits”) in various jurisdictions.

“The Library of Congress report contains valuable information on how countries are responding, or failing to respond, to this new technology. How nations tax the people who maintain cryptocurrency networks will obviously have a big effect on attracting or repelling innovators and investment,” said Abraham Sutherland in the press release issued by Congressman Tom Emmer’s office announcing the publication of the report.

The report shows that while tax authorities of a number of countries have published guidance on the taxation of mined tokens such as Bitcoin and other “proof-of-work” cryptocurrencies, only a few specifically address the taxation of tokens received through staking, a term used to describe the process of obtaining reward tokens in the newer “proof-of-stake” cryptocurrencies. Some surveyed countries have stated that reward tokens generated from mining by individuals on a small scale or as a hobby are not taxable until their disposal or are not taxable at all, while in other countries, a person may need to pay income tax on the mining rewards upon receipt even where mining is not a business or a profit-making scheme.

For tax purposes, staked tokens are treated differently from mined tokens in Australia and Finland. In Australia, tokens acquired through mining cryptocurrencies as a hobby do not need to be reported as income and taxes are only payable upon their disposal through the capital gains tax system. Tokens received by an individual as a payment or reward for forging or staking are treated as ordinary income on receipt, and the sale of such tokens in the future will also trigger a capital gains tax event. Finland treats mined cryptocurrencies as income from a hobby, whereas staked cryptocurrencies are taxed as capital gains, as the tax authority considers the staked asset as value created on top of the cryptocurrencies already held.

The countries in this report that have issued rules or guidance on the tax treatment of mining, or on the tax treatment of staking, airdrops, or hard forks, are shown on the accompanying map.

Map created by Susan Taylor-Pikulsky, Law Library of Congress.

For countries where no explicit taxation rules on block rewards are available, the report provides information such as general taxation rules, proposed legislation, official statements, and comments from legal scholars and tax experts, which may be helpful in understanding how block rewards may be treated for tax purposes.

This report complements a broader comparative study published by the Law Library in April 2019, titled Regulatory Approaches to Cryptoassets. The 2019 report covering 46 jurisdictions found that only a few tax authorities had published guidance on the application of tax rules to cryptocurrency activities at that time.

Other reports on cryptocurrencies the Law Library of Congress has published include:

If you are interested in this topic, we have also published cryptocurrency articles in the Global Legal Monitor. You may also subscribe to receive email alerts when new blog posts, Global Legal Monitor articles, and Law Library reports are published.

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