Kraken did not quietly process tax filings as a backend action this time. On the contrary, it first submitted about 56 million 1099-DA tax forms to the IRS in the context of the 2025 tax year filings, and then turned this batch of forms into a set of publicly pressured data evidence that directly targeted the current digital asset tax rules themselves. For a trading platform, this is not just a compliance action, but rather a reverse questioning of the system design using the scale of reporting: as regulation enters a more detailed phase, the rules are locking in real taxable behavior, or are they drawing in a massive amount of fragmented transactions into high-friction reporting.
The most striking aspect is not the total of 56 million, but rather the astonishing fragmentation structure within it. Kraken revealed that approximately 18.5 million tax forms correspond to transaction amounts below 1 dollar, approaching one-third of the total; about 74% of the tax form transaction amounts are below 50 dollars, with more than half even at 10 dollars or below, while transactions exceeding 600 dollars account for only about 8.5%. This distribution brings the problem to the forefront: it is not necessarily large transactions that create reporting pressure, but rather a vast number of small activities with minimal amounts. The range covered throughout the year has not been disclosed yet, but based on the publicly available data, the current framework primarily faces a “compliance friction driven by microtransactions.”
For this reason, Kraken did not stop at mere complaints but instead launched two clear demands: firstly, to establish a minimum tax-exempt treatment for crypto payments to reduce the repetitive triggering of reporting obligations in small-use scenarios; secondly, to adjust the tax schedule for staking rewards, allowing for a more flexible timing of tax obligations. The latter is sensitive due to the IRS currently treating staking rewards as ordinary income upon receipt, which has been a long-standing point of controversy. Kraken clearly wants to illustrate with these 56 million tax forms that the problem is no longer abstract; the misalignment between regulations and real usage behavior is being amplified in the form of reporting costs.
56 million tax forms press towards 1 dollar transactions
What truly dramatizes this controversy is not the total of 56 million itself, but the most glaring layer of distribution within this set of reporting data: approximately 18.5 million 1099-DA forms correspond to transaction amounts below 1 dollar. In other words, after the IRS introduced more granular reporting tools for digital asset transactions, a large number of nearly negligible small actions were also included in the same serious, record-keeping, and transmit-oriented tax process.
What Kraken presents is not just a mere industry complaint but a testimony with a sense of volume. For a long time, the outside world has more easily understood the reporting dilemma as a problem concerning a few large accounts, complex positions, or high-frequency traders; however, the opposite is precisely what has been brought to the table this time: it is not necessarily the large-amount accounts that pile up compliance costs, but numerous fragmented, dispersed, and minimal transactions. According to the data disclosed by Kraken, approximately 74% of tax forms have transaction amounts below 50 dollars, and more than half are under 10 dollars, with only about 8.5% exceeding 600 dollars. This indicates that the reporting system is becoming increasingly detailed and comprehensive, yet a considerable portion of the transactions being covered economically may not be “substantial.”
As a result, the conflict becomes very direct: the revenue management logic seeks completeness, traceability, and aggregation, while real usage behavior is filled with fragmentation and low-amount characteristics. When a transaction of less than 1 dollar must also be fitted into new tax form frameworks like the 1099-DA, a clear asymmetry begins to emerge between the strictness of rules and the actual value of transactions. What Kraken wants to emphasize with this set of data is that the issue lies in this misalignment—the problem is not that no one is willing to pay taxes, but that the current rules are pushing a large number of marginally insignificant transactions into a high-intensity reporting trajectory.
Of course, there is still a boundary that requires restraint: the briefing did not confirm whether every reportable transaction corresponds to a single 1099-DA form. In other words, 56 million tax forms should not be simply equated with 56 million independent transactions. However, even under this point still pending verification, the amount distribution publicly disclosed by Kraken is already sufficient to illustrate the problem: the tax machinery is advancing toward a finer granularity, while the compliance pressure is first piling up on those transactions with the smallest amounts that are the most fragmented and the least proportional.
74% below 50 dollars, who is buying fragmented orders?
The truly eye-catching aspect is not merely the 56 million total itself but rather the monetary structure of this batch of reporting records. According to data disclosed by Kraken, as cited by Jinse Finance and Planet Daily, about 74% of tax forms correspond to transaction amounts below 50 dollars, of which records below 10 dollars exceed half; conversely, tax forms with transaction amounts exceeding 600 dollars account for only about 8.5%. This means that the current wave of reporting peaks is not driven by a few high-value transactions but is instead stacked up by a massive number of fragmented orders.
This set of distributions directly lays out the cost structure of the current revenue management approach. For exchanges, even if the amount is only a few dollars or even lower, they still have to generate, organize, and send the corresponding forms; for users, these records do not automatically disappear just because the amounts are small, and they still need to be verified, archived, and explained when necessary; for the tax system, what ultimately enters the processing chain is not a batch of high-net-worth, easily identifiable key items, but rather an astonishing number of fragmented low-amount records. The rules do not differentiate the handling intensity between fragmented orders and large transactions, resulting in all parties having to endure highly mechanized compliance friction for low-value activities.
Therefore, what Kraken is putting forward is not just the notion that “taxes are too heavy,” nor is it simply opposing reporting; instead, it is inquiring a sharper question: when nearly three-quarters of the records are below 50 dollars, with more than half even not exceeding 10 dollars, what exactly does it mean to spread the same meticulous revenue management nets across all transactions—does it increase efficiency, or does it create an administrative congestion driven by small activities? In this sense, the 56 million tax forms are no longer just a story of scale, but have become a public inquiry into whether the design of rules is imbalanced.
Staking rewards taxed upon receipt force users to track cash flow
If the previous layer of controversy points to the institutional friction brought about by “full reporting for small transactions,” then Kraken's second focal point shifts to another more concealed issue that is more likely to drag ordinary users into fragmented compliance processes: staking rewards.
According to the IRS's current handling, staking rewards can be viewed as ordinary income the moment they are “received.” The problem lies exactly here—receiving does not equal selling; having an additional reward in the account does not mean the user has access to disposable cash flow. For many, this means that tax obligations arise ahead of actual income realization. The rules do not intervene when users complete transactions and secure profits but require tax calculations right when assets are just deposited.
This quickly shifts the question from “should I pay taxes” to “how to record, at what price to record, and how to continue calculating afterwards.” Staking rewards are often not a one-time disbursement but arrive multiple times; compounded with price fluctuations, whether ordinary users or node operators, all must chase the valuation for each deposit time point and then continue to track cost basis and subsequent outcome disposal. The controversy has long existed, focusing on several easily distorted links: how to determine the valuation time point, how to connect the cost basis, and whether there is a risk of near double taxation during subsequent selling or disposal.
What Kraken advocates here is not “do not tax.” It seeks to push for a design that allows tax timing to be more flexible, so that tax reporting obligations align as closely as possible to the actual moment of income realization. In other words, it is not questioning the tax itself but rather the premature triggering of tax acknowledgment: when receiving does not equal realization and when paper fluctuations have not yet translated into cash returns, whether the current rules are placing too much cost for calculation, record-keeping, and explanation upon users.
Exchanges kick the tax reduction ball to Congress
If the previous debate remained at “when to recognize income,” then Kraken has gone a step further: it is no longer merely complaining about compliance pressure; instead, it is using the roughly 56 million 1099-DA forms already submitted to the IRS as a set of evidence that can be presented to the table, in turn demanding Congress to rewrite the rules. The logic is straightforward—since under the context of filings related to the 2025 tax year, a large number of forms correspond to extremely small transactions, then the problem is not just the hassle of reporting, but whether the existing system is placing excessive tax processing costs on overly trivial behaviors.
The amount distribution presented by Kraken is the basis for its current pressure: approximately 18.5 million tax forms correspond to transaction amounts below 1 dollar, accounting for nearly one-third of the total; about 74% are below 50 dollars; tax forms under 10 dollars exceed half; and those truly above 600 dollars account for only about 8.5%. These figures are organized into a clear argument by it: when the reporting system aims to cover such a high proportion of small records, it is not large tax avoidance spaces that the rules are targeting, but instead the friction costs of recording, calculating, and explaining that are being magnified first. Consequently, one of the core policy directions proposed by Kraken is to set a minimum tax-exempt treatment for crypto payments, with a concept close to the exemptions for small transactions in traditional foreign currencies—not denying tax obligations but attempting to leave a buffer for low-value, routine payment scenarios.
This also explains why what Kraken has put forward this time is not a single-point demand but rather a set of interrelated policy combinations: on one side, it demands tax exemption for small crypto payments, and on the other, it calls for more flexible tax timing for staking rewards. The former addresses the friction of “too small amounts yet still needing individual processing,” while the latter addresses the misalignment of “tax acknowledgment triggered before real income has been realized.” Both threads combine to point towards the same goal: transitioning tax rules from “intensive recording whenever an event occurs” to designs that are more closely aligned with actual economic outcomes.
However, within the current information boundary, this still remains a public pressure rather than an actual legislative process. Kraken's briefing did not disclose its specific lobbying targets, and it is unclear whether it communicated directly with relevant congressional committees or released policy signals through public materials. More critically, as of the existing scope of information, there has been no formal response from the IRS nor any public statement from congressional representatives, let alone any progress that has entered a procedure or is about to pass. In other words, Kraken has kicked the ball to Congress, but no one has yet picked up the next action on the field.
The peak of tax forms has arrived; how long can old rules endure?
From this point forward, the signals released by Kraken are already very clear: as 1099-DA forms are used more broadly for digital asset transaction reporting, tax compliance in the United States is entering a more detailed and heavier phase. The issue is that while the regulatory granularity is sinking, the rules themselves have not truly adapted to the most common and trivial usage scenarios. The approximately 56 million tax forms submitted by Kraken to the IRS, along with the further disclosure of the amount distribution, essentially compresses issues originally resting in principle debates into a quantitative policy evidence set—nearly one-third below 1 dollar, 74% below 50 dollars, and over half not exceeding 10 dollars, while those above 600 dollars account for only about 8.5%.
The damaging power of this set of data lies not in the “large quantity” itself but rather in its exposure of the misalignment within the current framework: when a large number of actions are extremely small payments, continuing to use a reporting logic centered on asset disposition almost inevitably leads to friction. On another end, staking rewards are still seen by the IRS as ordinary income upon receipt, this long-controversial treatment also renders “when to pay taxes” a lingering unresolved issue. In other words, what Congress is faced with today is not a simple technical detail of tax reporting but rather two classes of high-frequency scenarios—small payments and staking—that may need to be re-incorporated into a system design closer to reality.
If Congress continues to delay providing a more reasonable minimum amount exemption and a more flexible timing space, friction will only continue to spill over: exchanges will be burdened with increasingly complex reporting obligations, users will bear disproportionate understanding and recording costs for a large number of low-value activities, and the tax system itself will also be continuously pressed by vast amounts of fragmented information. As of now, there is no immediate response from Congress or the IRS in the public domain, nor is there any verified legislative timeline, which means that after Kraken has posed the question to Washington, real institutional feedback is still absent.
Therefore, this matter shouldn't be seen merely as a tax news item. Behind those 56 million tax forms lies a more fundamental question being raised: if a digital asset is to be used as a daily payment tool, does the existing US tax system pave the way for such a usage, or is it still blocking it at the door with old rules?
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