Digital asset exchange Kraken revealed it issued more than 56 million Form 1099-DA tax documents to the IRS for the 2025 tax year. The vast majority of these filings—nearly one-third for transactions under $1, over half for $10 or less, and three-quarters below $50—highlight how the current tax code burdens ordinary users rather than high-volume traders.
According to Kraken, the real challenge lies not in reporting technology but in outdated regulations that treat even the smallest crypto activities as taxable events.
The financial and time costs are significant. US taxpayers already spend a combined $146 billion annually on filing, with the average individual dedicating about eight hours and $128 to $300 per return, per Tax Foundation estimates.
For the more than 55 million American adults who own digital assets, the burden intensifies.
Standard tax software rarely accommodates crypto, forcing users to invest in specialized tools costing $49 to $599 yearly.
Active holders often face an additional $250 to $500 in compliance expenses, plus hours reconciling transactions across wallets and platforms.
Kraken noted thousands of customer inquiries about the new 1099-DA forms, which report only gross proceeds without cost-basis details, leaving investors to calculate gains or losses themselves.
Kraken’s internal data underscores the inefficiency: 53.4 percent of forms covered transactions of $10 or less, while just 8.5 percent exceeded $600—the threshold used for other payment apps like Venmo.
Many stem from routine actions such as receiving fractional staking rewards or making minor purchases, generating minimal tax revenue but disproportionate administrative hassle for both users and the IRS. To address these issues, Kraken advocates two targeted reforms.
First, lawmakers should establish a robust de minimis exemption for small digital asset transactions, similar to existing rules for other payments but tailored to crypto’s volatility.
For instance, using Bitcoin to buy a $7.99 meal currently triggers capital gains reporting, cost-basis tracking, and Form 8949 filings—an impractical requirement the United States largely stands alone in imposing.
The UK, by contrast, applies an annual capital gains allowance that spares modest trades.
Kraken suggests indexing any threshold to inflation with safeguards against abuse, noting that pending legislation like the GENIUS Act (signed in July 2025) already treats digital payments more neutrally.
Second, the platform urges an end to “phantom income” taxation on staking rewards.
Under current IRS rules, even tiny, unsold tokens earned for securing blockchains count as ordinary income at fair market value upon receipt.
Users who restake these assets may owe taxes on amounts that later plummet in value.
Kraken proposes giving taxpayers the option to defer taxation until sale, when actual economic gain or loss materializes.
This change would align reporting with real-world behavior, reduce micro-filings, and leverage exchange data more effectively. With bipartisan momentum building around tax simplification,
Kraken emphasizes that these fixes would benefit everyday investors across demographics without compromising revenue collection.
As the digital asset ecosystem gains more users in 2026, updating the tax code to reflect modern realities is no longer optional—it is essential for fostering broader adoption and fairness. Kraken’s data and recommendations signal a call for Congress to act before next tax season potentially compounds or overcomplicates the frustration for millions.