IRS Redefines Cryptocurrency as Property for Tax Purposes

The US Internal Revenue Service (IRS) has reaffirmed its stance on cryptocurrency classification for tax purposes. According to the IRS, digital assets are considered property, not currency, and will be taxed accordingly.

This means that staking rewards and mining payouts will be treated as ordinary income, subject to capital gains tax from the moment they are received in a user's wallet.

The classification also applies to other crypto use cases, such as selling or swapping tokens, which will incur capital gains tax. The IRS treats spending cryptocurrency as selling property, making users liable for capital gains tax on these transactions.

A proposed legislative package aimed at reviewing crypto taxation is moving through the US House Ways and Means Committee. If passed, this new law would eliminate tax deferral benefits for crypto miners and stakers, requiring them to pay taxes only when they sell or dispose of their assets.