75% of U.S. crypto tax forms report under $50, Kraken pushes for ‘de minimis’ relief
Kraken is urging U.S. regulators to overhaul how small crypto transactions are taxed, arguing that the current reporting system burdens both users and brokers while providing little value to the government.
In a report dated April 22, the exchange revealed that out of roughly 56 million crypto tax forms it processed for U.S. customers, three-quarters reported transactions worth less than 50 dollars. Around half of all forms – about 28 million – involved amounts below 10 dollars.
Under current IRS rules, brokers must report every single taxable crypto transaction throughout the year, regardless of size. That turns even trivial activities – like swapping a few dollars’ worth of tokens or making a tiny purchase with crypto – into events that can trigger capital gains reporting.
Kraken contrasted this with the treatment of other payment platforms. Services such as Venmo only have to report transactions once they cross a relatively high threshold, currently 600 dollars in payments for goods and services. By comparison, the crypto sector faces an “every transaction, every time” regime.
The exchange argued that this framework is both costly and needlessly complex. For brokers, it means building systems to capture, process, and transmit vast volumes of low-value trades. For users, it translates into confusing tax forms and additional accounting work for amounts that barely move the needle on their overall tax bill.
From the regulator’s perspective, Kraken added, the effort to collect and process millions of micro-transactions is unlikely to materially improve compliance or revenue. Instead, it clutters the system with noise and makes it harder to focus on meaningful tax evasion risks.
To address this, the firm called for a “meaningful de minimis threshold,” one that:
– exempts very small crypto transactions from capital gains reporting,
– is indexed to inflation so it maintains its real value over time, and
– includes anti-abuse safeguards to prevent users from gaming the system by artificially splitting larger trades into multiple small ones.
In tax terminology, a “de minimis exemption” is a rule that says transactions below a certain dollar amount can be ignored for reporting or tax purposes. Applied to crypto, it would mean that if a user spends or disposes of a small amount of digital assets under the threshold, they would not need to calculate and report the associated gain or loss.
For now, that kind of broad relief looks distant. The leading proposal under discussion in Washington focuses only on payment stablecoins, excluding major assets like Bitcoin and other volatile cryptocurrencies. Under that approach, everyday payments made with stablecoins could be exempted from tax reporting if they fall below 200 dollars.
Even this limited measure faces headwinds. There have been reported efforts behind the scenes to ensure that only a narrow set of digital assets qualify, leaving the majority of the crypto market subject to full tax treatment on every transaction. That raises the risk that any “relief” ends up too narrow to meaningfully alter most users’ tax burdens.
On top of that, key tax changes are expected to be bundled with broader digital asset legislation, notably the crypto market structure package known as the CLARITY Act. Progress on that bill has been uneven, with multiple delays and political obstacles slowing its markup and path forward.
If lawmakers fail to move the CLARITY bill by May, expectations are that serious consideration could be pushed back as far as 2027. Because the proposed small-transfer tax exemptions are attached to this broader framework, any delay in CLARITY would likely postpone crypto tax relief by the same margin.
That pessimistic outlook is reflected in current market-based forecasts. As of now, traders are assigning only about a 7% probability that the U.S. president will eliminate capital gains taxes on crypto this year. The odds of the CLARITY Act passing within the same timeframe are viewed as higher but still far from certain, sitting around 46%.
Taken together, these estimates signal that market participants do not expect significant crypto tax relief – particularly for everyday, small-value transactions – to materialize in the near term. For most American crypto users, that means the existing reporting obligations are likely to remain in force for at least several more tax seasons.
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Why a de minimis rule matters for everyday users
The absence of a de minimis exemption has practical consequences that go far beyond abstract tax policy debates.
Every time a user spends crypto on a coffee, swaps tokens on an exchange, or moves assets between certain platforms in a way that constitutes a taxable event, they may incur a capital gain or loss based on how the asset’s value has changed since acquisition. Tracking the cost basis and fair market value for countless small transfers can quickly become unmanageable without professional tools or assistance.
This complexity discourages the use of crypto as a means of payment. Instead of seamlessly using digital assets like cash, many holders prefer to keep them as long-term investments to avoid the administrative headache of tracking micro-gains on daily purchases. That, in turn, undermines one of the core narratives of crypto as a practical medium of exchange.
A rational de minimis threshold would effectively draw a line between investment activity and day-to-day spending. Gains on small, routine payments could be ignored, while larger disposals, trades, and investment decisions would remain fully taxable and reportable. That is the model some other jurisdictions have adopted in varying forms, helping support legitimate low-value use without sacrificing tax enforcement on substantial gains.
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The cost of over-reporting for brokers and the IRS
For intermediaries like Kraken, the mandate to track and submit data on every transaction – including those worth only a few dollars – imposes significant compliance costs. They must develop systems capable of recording, formatting, and transmitting immense volumes of data to the IRS, then handle customer support when users receive confusing or unexpected forms.
The IRS, in turn, faces the challenge of processing, storing, and potentially auditing this flood of micro-level information. Resources spent parsing large datasets of negligible economic significance could be redirected toward higher-value enforcement actions, such as targeting sophisticated tax evasion schemes or large-scale noncompliance.
Kraken’s argument is that a carefully designed de minimis rule would remove millions of low-impact records from the pipeline. That would not only lower compliance burdens for industry participants but also help regulators concentrate on genuinely material tax risks. The key, the exchange stresses, is pairing the threshold with anti-avoidance measures so that users cannot simply break up one big trade into hundreds of tiny ones to evade reporting.
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Why stablecoins are at the center of current proposals
Lawmakers’ initial focus on payment stablecoins is not accidental. These tokens, typically pegged to a fiat currency like the U.S. dollar, are less volatile than assets such as Bitcoin. When used for everyday payments, they generally produce much smaller capital gains or losses compared to speculative crypto trades.
Because the price is relatively stable, policymakers view stablecoin payments as functionally closer to using traditional electronic money. Exempting small stablecoin payments from capital gains reporting, therefore, seems like a lower-risk first step: it simplifies life for users while posing limited risk of material tax leakage.
However, this narrow focus means that those who use more volatile crypto assets for purchases or low-value transfers would still face the full weight of current rules. For example, paying 50 dollars’ worth of stablecoins at a store might fall under an eventual exemption, while paying the same amount in Bitcoin could remain a taxable event requiring careful record-keeping.
This asset-by-asset approach could create a fragmented system where users must understand separate tax treatments depending on which token they spend, potentially adding new layers of confusion.
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Political and legislative drag on comprehensive reform
Even when there is conceptual support for simplifying rules, tax legislation rarely moves quickly. Crypto-focused bills must compete with broader fiscal priorities, partisan disagreements, and shifting political dynamics.
The CLARITY Act, envisioned as a key framework for clarifying how digital assets are regulated and taxed, has repeatedly faced delays. Technical complexity, lobbying by various industry and consumer groups, and disagreements over how broadly to define and supervise digital assets all contribute to the holdup.
Because small-transfer tax relief has been tied to this larger legislative package, it is effectively caught in the same bottleneck. Each missed deadline decreases the likelihood of near-term reform and increases the chance that meaningful changes will be deferred until a new Congress or administration, potentially several years away.
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What this means for U.S. crypto users right now
Until the law changes, U.S. residents remain subject to the existing regime. In practice, that means:
– Treating most disposals of crypto – whether through sales, swaps, or spending – as taxable events.
– Tracking acquisition cost and sale value for each transaction, regardless of size.
– Expecting to receive detailed tax forms from brokers if they have used centralized exchanges or certain custodial platforms.
For active traders or users who make many small transfers, this can generate a large stack of forms and a complex paper trail. Tax software and professional advice can help, but they also add to the cost of participating in the crypto ecosystem.
Meanwhile, large platforms like Kraken are likely to continue pressing for reform, using data from their user bases to demonstrate to policymakers that a significant share of current reporting revolves around economically trivial amounts.
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How a future de minimis rule could be structured
If lawmakers eventually decide to adopt a broader de minimis standard, several design questions will matter:
– Threshold level: Setting the limit too low may fail to ease the reporting burden, while setting it too high could open the door to abuse or noticeable revenue loss. Kraken has not publicly fixed a specific dollar figure, but its data clearly target frequent, very small transfers.
– Indexation: Tying the threshold to inflation would prevent its real value from eroding over time, a feature Kraken explicitly advocates.
– Scope of assets: Policymakers must choose whether the rule applies only to certain categories (for example, stablecoins) or to all digital assets used for payments.
– Aggregation rules: Anti-abuse guardrails could require aggregating multiple transactions within a day or another period, ensuring that users cannot simply split a 1,000-dollar disposal into dozens of sub-threshold payments.
A well-calibrated rule would aim to protect the tax base while finally acknowledging that tracking every penny of gain on micro-transactions is neither efficient nor realistic.
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Outlook: incremental changes more likely than sweeping relief
Given the current political climate and the legislative hurdles facing broad crypto reform, the most plausible near-term outcome is incremental change rather than sweeping tax relief.
Limited de minimis exemptions for specific assets like payment stablecoins, pilot programs, or narrow regulatory guidance may appear before comprehensive legislation is passed. Such steps could serve as test cases, informing more ambitious reforms down the road.
For now, however, both market sentiment and legislative momentum suggest that U.S. crypto users should not expect substantial tax easing on small transfers this year. The conversation is clearly underway, and data like Kraken’s 75%-under-50-dollars statistic are shaping that debate-but translating those insights into law remains a slow, contested process.