Taxation of Blockchain Staking Rewards: Propositions Based on a Comparative Legal Analysis

Blockchain technology is seen as an essential part of a decentralized society. Given the relatively high energy consumption of proof-of-work consensus algorithms, proof-of-stake blockchains are becoming increasingly popular to reach consensus on the current state of the blockchain. With proof-of-stake, a randomized process determines which node is allowed to validate the next block of transactions. In order to participate, coin holders must stake their coins and receive staking rewards in return. Yet, there still is high uncertainty around the taxation of these staking rewards. This analysis compares the taxation of staking rewards in Germany, Austria, and Switzerland and derives four propositions under the premise of reaching a higher degree of tax neutrality. The legal comparison illustrates the heterogeneity in terms of taxing staking rewards. To achieve a more neutral taxation, (1) staking should only qualify as a business activity under clearly defined and restrictive circumstances. (2) Whenever staking does not represent a main business activity, staking rewards should not be taxed upon receipt. (3) Instead, they should be taxed upon disposal. (4) Moreover, staking should not cause further tax consequences for staked coins.