Kraken Urges Small Crypto Tax Exemption

Image Credit: Kraken

Kraken is calling on Congress to create a de minimis tax exemption for small crypto transactions after issuing more than 56 million Form 1099-DAs to the IRS for the 2025 tax year. The exchange said nearly a third of those forms, about 18.5 million, covered transactions worth less than $1. More than half were for $10 or less, and about three-quarters were for less than $50.

The data gives Kraken a concrete example for a long-running industry argument that US crypto tax rules capture even very small transactions. Kraken said the burden is falling on ordinary users who now have to reconcile small purchases, staking rewards and other low-value crypto transactions

The Filing Burden Started With 1099-DA

The new forms are part of the IRS’s digital asset broker reporting regime. Under final rules, brokers must report gross proceeds for covered digital asset transactions starting with transactions on or after Jan. 1 2025. Basis reporting starts later for certain transactions beginning on Jan. 1 2026.

That phase-in is part of the problem Kraken is pointing to. For 2025 transactions, brokers report proceeds but generally do not have to report cost basis. Kraken said that left many users confused because the form showed transaction proceeds without the information needed to calculate gain or loss easily.

Kraken Wants a Broader Exemption

Kraken’s main request is a de minimis exemption that would remove small, routine digital asset payments from capital gains reporting. Kraken said one current proposal would create a limited exemption for payment stablecoins, but not for Bitcoin or other widely held crypto assets.

The exchange said the threshold should be indexed to inflation and paired with anti-abuse guardrails. Its argument is that millions of low-value forms create compliance costs that are out of proportion to the tax revenue likely to be collected.

Staking Rewards are the Second Target

Kraken also wants Congress to change how staking rewards are taxed. The exchange said many sub-dollar forms came from tiny staking rewards, while current IRS treatment can tax rewards as ordinary income when they are received.

Kraken wants taxpayers to choose whether staking rewards are taxed when they are received or when they are sold. That would reduce micro-transaction reporting and avoid tax bills on token value that may fall before a user sells. The filing data gives tax reform advocates a clearer argument that crypto tax policy now reaches even very small transactions.