Kraken Calls for Reform of Digital Asset Taxes as Micro-Transactions Overwhelm Everyday Investors

Why It Matters

Outdated tax treatment of tiny crypto trades inflates filing costs for millions of investors and strains IRS resources, while reform could lower barriers to broader digital‑asset adoption.

Key Takeaways

• Kraken filed over 56 million Form 1099‑DA for 2025
• One‑third of filings involve transactions under $1
• Over 50% of reports are for trades $10 or less
• Kraken urges a de minimis exemption for small crypto transactions
• Platform proposes deferring tax on staking rewards until sale

Pulse Analysis

The flood of micro‑transactions on crypto exchanges is reshaping the tax landscape. Kraken’s data shows that more than half of its 1099‑DA filings relate to trades of $10 or less, forcing everyday users to spend hours and hundreds of dollars on specialized software or professional help. This administrative overload not only inflates compliance costs—estimated at $146 billion nationwide for all tax filings—but also creates a bottleneck for the IRS, which must process millions of low‑value reports each year.

A targeted de minimis exemption could alleviate the strain. By setting a modest threshold—indexed to inflation and comparable to rules for payment apps—transactions below that level would be excluded from reporting, mirroring the UK’s annual capital‑gains allowance. The GENIUS Act, already signed in July 2025, hints at a more neutral treatment of digital payments, and Kraken’s proposal builds on that momentum, offering a pragmatic path to modernize the code without sacrificing revenue.

Equally critical is the treatment of staking rewards, currently classified as ordinary income at receipt. This “phantom income” can trigger tax liabilities on assets that may later lose value, discouraging participation in network security. Allowing taxpayers to defer taxation until a sale aligns tax liability with actual economic gain, reduces unnecessary filings, and leverages exchange data for accurate reporting. Together, these reforms could lower compliance costs, improve IRS efficiency, and encourage broader crypto adoption as the market heads toward 2026.