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Kraken urged the U.S. to eliminate tax reporting for small transactions
The crypto exchange Kraken reported that this year it sent more than 56 million transaction reports to the Internal Revenue Service (IRS) for transactions made by clients in 2025. The platform urged the authorities to simplify the tax filing system.
Nearly one-third of the tax forms (18.5 million) related to transactions under $1, more than half involved transactions under $10, and three-quarters involved transactions under $50. These reports were not related to the operations of experienced traders who earned significant profits from cryptocurrencies, Kraken assured. Currently, a form is generated for any transaction, which the trader is required to complete, otherwise they risk receiving a notice from the IRS.
The exchange cited data from the Tax Foundation, according to which filling out individual tax returns alone costs Americans $146 billion. According to IRS estimates, the average non-business taxpayer spends about eight hours and between $128 and $300 to complete a standard tax form.
Many crypto investors require special tools for tax reporting, and the cost of these services ranges from $49 to $599 per year, which adds to the regular expenses of filing a tax return. Reconciling microtransactions between exchanges and wallets can take several hours.
Kraken’s management proposed exempting crypto traders from capital gains tax on small payments made using digital assets.
“Imagine you walk into a café and pay $7.99 for lunch in Bitcoin through a payment app. You have initiated a taxable event. Technically, you are required to determine the cost basis of the specific Bitcoin you spent, calculate whether you made a profit or loss, and report it to the tax authorities. And all of this for a hamburger and fries,” Kraken gave as an example.
The exchange insists that a significant portion of the submitted reports under one dollar relates to staking rewards. As the company’s management stated, these are tiny fractions of tokens earned for helping validate blockchains. The tax authority treats each reward as ordinary income at the time of receipt, valued at fair market value at that date. However, most people do not sell the reward immediately but continue to stake the assets. Nevertheless, they must pay taxes on an amount they have not yet realized. If the token’s price drops between receipt and tax filing, the taxpayer must pay tax on an amount exceeding the asset’s current value.
Kraken calls this phantom income. The exchange urged Congress to allow taxpayers to choose when staking rewards should be taxed: at the time of receipt or at the time of sale, when profit or loss can be accurately calculated. This would reduce the volume of reporting for microtransactions and preserve the concept of staking, whereby traders hold and grow their assets rather than spend them.
Recently, analyst Cato Institute Nicholas Anthony also urged U.S. authorities to abolish capital gains tax on cryptocurrencies, as it prevents Bitcoin from becoming a medium for everyday payments.
