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David Schwartz Explains the Uniqueness of Crypto Staking

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by A1

13 hours ago


Recent comments by Ripple CTO David Schwartz shed light on crucial aspects of crypto staking amidst ongoing debates about its tax implications.

Staking Rewards and Interest Income

Schwartz clarified the difference between creating new value and transferring existing value. He noted that staking is about creation, while interest income involves transfer. 'You don't earn staking rewards, you create them. They didn't exist before you created them,' Schwartz emphasized, highlighting how staking rewards differ from traditional financial income.

How Crypto Staking Differs from Dividends

When asked how staking differs from receiving dividends on stocks, Schwartz explained that dividends are created and transferred by someone else, whereas with crypto staking, you create the property you receive. 'Staking is creating property, not receiving it from someone else who earned/created it,' Schwartz added.

IRS on Taxing Crypto Staking

This clarification is particularly meaningful as regulators and tax authorities work to classify and tax different crypto activities. According to a recent Bloomberg report, the IRS officially declared crypto staking taxable, stating that tax liabilities arise as soon as staking rewards are received. This ruling emerged amid a lawsuit from a Tennessee couple staking on the Tezos network, challenging the IRS's tax interpretation concerning crypto staking.

David Schwartz's insights into crypto staking help navigate the financial and tax distinctions when compared to traditional earnings.

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