Here we go. We have come to the place in development, where taxation becomes the deciding factor in crypto. *Takes his hat off
Your concerns about taxation on staking rewards highlight a broader issue in the evolving landscape of cryptocurrency regulations. It’s crucial to note that existing tax laws often struggle to keep up with the novel features of blockchain networks, especially in the context of inflationary token distributions. Comparing staking rewards to traditional dividends is a common but flawed analogy, as staking rewards don’t originate from profit-making activities disbursed to shareholders.
In the case of cryptocurrency, staking rewards involve a redistribution mechanism of existing value rather than the creation of additional value. Currently, there is a lack of jurisprudence and established tax rules specifically addressing these new use cases. As a result, the problem you’re attempting to solve may not even exist within the current regulatory framework. It’s essential to recognize the need for ongoing dialogue and legal developments in this space to address potential challenges like the one you’ve highlighted.
Additionally, it’s worth noting that regulators are more likely to lean towards capital gain taxes as the chosen tax system for staking rewards. This approach would involve assessing the difference between the market price when the reward tokens were emitted and the price at which they were eventually sold. An alternative and simpler accounting method could involve calculating the average buying price of all held tokens by an individual, with staking rewards gradually adjusting this average over time based on the market prices at which they were emitted.
Could this even be enforced on bridged ATOM?
Wouldn’t this wreck LPs?