Kraken says it filed 56 million crypto tax forms for 2025, with 74% covering transactions valued below $50.
The lack of a least-value exemption for crypto payments and staking rewards taxed at receipt creates a massive tax reporting burden for investors.
The exchange is advocating for Congress to pass a broad, inflation-indexed de minimis tax exemption and allow taxpayers to elect when staking rewards are taxed.
Each form is also sent to the customer and creates a reconciliation task for the taxpayer who receives it. On top of that, standard tax software does not handle crypto transactions. Kraken estimated the additional burden on an active crypto holder at $250-$500 a year for dedicated tax software, on top of standard filing costs.
“The hours taxpayers spend reconciling these micro-transactions, often with incomplete data, generate costs wildly disproportionate to any revenue the IRS will collect from them,” Kraken said.
The Tax Foundation estimates individual returns already cost Americans a combined $146 billion in time and expenses, the exchange said, and the National Taxpayers Union Foundation puts the average time for non-business filers at about 13 hours and $290 per return.
Brokers reporting for 2025 provide gross proceeds without cost basis, meaning the form shows what was sold, but not what it was bought for. Kraken said it fielded thousands of client questions about forms that captured only one side of the calculation.
Two problems
Kraken pointed to two parts of the tax code that cause problems. One is the lack of a de minimis, or low-level, exemption for crypto payments, which means even small purchases with crypto can trigger a taxable event that needs to be declared.
“Imagine you walk into a Steak ’n Shake and pay for a $7.99 meal with Bitcoin through a payment app. You have triggered a taxable event,” Kraken wrote as an example. “You are technically required to look up the cost basis of the specific Bitcoin you spent, calculate whether you had a gain or loss on that fraction of a coin, and report it on Form 8949.”
That’s the same argument libertarian think tank Cato Institute recently made. According to the institute, buying a cup of coffee every day with BTC “can result in over 100 pages of tax filings.”
The second issue is staking. Rewards earned on staked assets are treated as ordinary income at the moment of receipt, based on the token’s market price that day. Most holders keep those tokens instead of selling them, meaning they owe tax on tokens that haven’t been sold.
If the token price falls between receipt and filing, the tax can exceed the asset’s current value. Kraken calls this phantom income and says a large share of the sub-dollar 1099-DAs it issued were staking distributions.
Legislation moving through Congress includes a de minimis provision, but is limited to stablecoins. Kraken is pushing for a broader inflation-indexed exemption, paired with anti-abuse guardrails to prevent structuring.
The exchange is also asking Congress to let taxpayers elect when staking rewards are taxed, either at receipt under current rules or at sale, when a gain or loss is realized.
Kraken says its systems and those of other exchanges already support both reporting methods, but the choice needs to be authorized.
World Liberty unfairly froze Sun’s $WLFI tokens and threatened him, the lawsuit alleged.
What to know:
Justin Sun, creator of the Tron blockchain, has sued World Liberty Financial, a Trump family–backed crypto and stablecoin project, alleging it unlawfully locked up his $WLFI tokens and defrauded him about their rights and value.
The lawsuit claims Sun invested $45 million in $WLFI in 2024 based partly on the…
