Kraken has called for changes to U.S. digital asset tax rules after reporting more than 56 million Form 1099-DAs to the Internal Revenue Service for the 2025 tax year.
The exchange said a large share of those forms covered very small transactions. Kraken argued that the current reporting system creates an outsized burden for everyday crypto users and adds confusion during tax season.
In its statement, Kraken said 18.5 million of the forms it issued were tied to transactions below $1. More than half were for $10 or less, while about three out of four were under $50.
The company said many of these entries came from routine activity such as small purchases and staking rewards. Kraken used that data to support two proposed changes: a real de minimis exemption for small digital asset payments and a new option for when staking rewards become taxable.
Kraken says small transactions are burdening filers
Kraken said the current tax rules force brokers to report every qualifying digital asset transaction, even when the amount is tiny. Under that system, a small crypto payment or a staking reward worth only a fraction of a cent can still generate a tax form.
The company said this has created confusion for users who must reconcile large volumes of data while still trying to understand how crypto gains and losses should be reported. Moreover, the exchange also said the issue goes beyond form volume.
In 2025, brokers reported gross proceeds but not cost basis on many 1099-DAs, which made the forms harder for users to interpret. Kraken said it received thousands of questions from customers trying to understand the documents.
It also pointed to the challenge exchanges faced in meeting the timeline set by the IRS and the Treasury for producing the new reports.
Kraken pushes de minimis tax fix
Kraken said Congress should create a de minimis exemption that removes small digital asset payments from capital gains reporting.
The exchange framed the issue around everyday spending, noting that a person who buys a low-cost item with Bitcoin can still trigger a taxable event under current law. That user may then need to find the cost basis of the specific crypto used, calculate gain or loss, and report it on tax forms.
Additionally, Kraken argued that this system does not match how people use digital assets for routine payments. The company said the U.S. remains stricter than some other jurisdictions on this point and called for a more practical threshold that is indexed to inflation and supported by anti-abuse rules.
In its view, a broader exemption would reduce unnecessary reporting while still protecting tax compliance. Kraken also noted that some draft legislation has included limited de minimis treatment for stablecoin payments, but said Bitcoin and other widely held assets should also be covered.
Kraken flags staking taxes
The exchange also called for a change in how staking rewards are taxed. Kraken said the IRS currently treats rewards as ordinary income at the time they are received, based on fair market value on that date.
The company argued that this method can leave taxpayers with a bill on value they have not converted into cash, especially if the token price falls before they sell the reward.
Kraken described that outcome as “phantom income” and said it does not reflect how many users handle staking rewards in practice. Rather than selling those rewards right away, many holders keep them in the network and continue staking.
Kraken said Congress should allow taxpayers to choose between taxation at receipt or taxation at sale. According to the company, that change would cut down on micro-transaction reporting and make the tax event easier to measure because it would occur when the asset is actually sold.
Kraken IPO plans in focus
The company tied its tax argument to a wider push for clearer digital asset rules in the U.S. Kraken said the issue affects millions of Americans who now hold crypto and are trying to comply with a tax framework that predates broad digital asset use.
In its statement, the exchange said, “This is not about helping crypto companies.” It added that the focus is on making the system easier for taxpayers who are already facing high filing costs and a complex reporting process.
The tax debate comes as Kraken remains active on other fronts. The exchange has been linked to plans for a public market debut after filing confidentially for an initial public offering with the US Securities and Exchange Commission in November 2025.
Although reports later suggested the IPO may have been delayed, Kraken co-CEO Arjun Sethi said in April that the company was still likely to go public soon.
Separately, Payward, Kraken’s parent company, agreed to acquire derivatives exchange Bitnomial in a deal worth up to $550 million in cash and stock. The transaction is expected to close in the first half of 2026, subject to standard conditions and regulatory filings.