Kraken reports 56 million crypto tax forms and urges US lawmakers to simplify rules for small transactions and staking income.
Cryptocurrency exchange Kraken has asked the United States to change its crypto tax rules. The company claimed that existing legislation confuses millions of users. In addition, new reporting regulations have added more paper work to very small transactions. This has led to a lot of complicated tax filing by many ordinary investors.
Recently, Kraken disclosed that it submitted more than 56 million tax filings to the Internal Revenue Service in 2025. These are known as 1099-DAs, which report transactions of digital assets. But almost 18.5 million forms involved less than one dollar transactions. Thus, numerous reports entailed extremely low financial activity.
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Moreover, over fifty percent of these forms had transactions of less than 10. Around 74.3% were below $50, while only 8.5% exceeded $600. This is the typical reporting trigger in other financial systems. Therefore, analysts believe that the existing crypto tax regime poses an unwarranted burden on users and regulators.
Small Crypto Transactions Create Big Tax Burden
A lot of these reported transactions were not big investments or profits. Rather, they incorporated staking rewards, small purchases, and regular transfers. These operations are usually done in small quantities, in some cases only a fraction of a cent. Nevertheless, under the current regulations, a separate tax form is required in every transaction.
This means that users have to be cautious of every transaction and report it. Otherwise, they can be notified by the Internal Revenue Service. Thus, even ordinary crypto users are now subject to complicated taxation. This has brought about issues of equity and effectiveness.
In the meantime, tax filing in the United States is already expensive and time-consuming. The Tax Foundation estimates that Americans incur an annual cost of approximately 146 billion on tax compliance. The average time and money that an individual spends on filing taxes are 8 hours and 128-300 dollars. Crypto reporting adds time and cost.
Kraken Suggests Simple Solutions for Lawmakers
Kraken suggested a de minimis rule of small crypto payments to resolve these problems. The rule would eliminate the necessity to report extremely small transactions. As an illustration, purchasing a meal of $7.99 using Bitcoin would not result in a tax event. This transformation would save millions of unwarranted reports.
Similar rules are already followed by other countries. An example is the United Kingdom, which permits small crypto transactions with an annual limit without reporting. Thus, analysts think that the United States might implement a similar system. This would simplify tax regulations to common users.
Moreover, Kraken pointed out issues with taxation of staking rewards. Nowadays, the Internal Revenue Service considers rewards as income upon receipt. Nevertheless, these rewards are not sold by the users at once. In the event of a decrease in prices later, users can be taxed on the value that they have not acquired.
It is referred to as phantom income, and it impacts a large number of crypto holders. To address this, Kraken proposed that users should be given the option to pay taxes when selling rewards. This would be a true reflection of gains and less confusion. In addition, it would harmonize the taxation of crypto with the real-life use of these assets.
Growing Crypto Use Pushes Need for Policy Change
Digital assets are owned by over 55 million adults in the United States today. Tax systems need to evolve rapidly as the use of crypto increases. Nevertheless, the existing regulations were developed prior to the emergence of digital assets. Thus, numerous professionals think that there should be some changes to keep up with the current financial systems.
Some steps have already been made by lawmakers, such as the enactment of the GENIUS Act in July 2025. This legislation established a payment system in the digital world. Nevertheless, the tax regulations remain behind these changes. Consequently, reform is still being advocated by such companies as Kraken.
To sum up, the crypto tax debate is intensifying. Regulators want to make sure that there is compliance, but users want easier rules. Thus, the future policy adjustments can be aimed at decreasing the burden and safeguarding revenue. With successful reforms, millions of crypto users would have a more transparent and equitable system.