Congress is advancing legislation to address how the U.S. tax code treats crypto mining and staking rewards, providing much-needed clarity for validators and their institutional clients.
H.R. 9175, the Tax Clarity for Mining and Staking Act, would allow miners and stakers to defer tax obligations on newly minted tokens until they sell them, ending a cash-flow penalty that has pushed validation infrastructure and its largest clients toward offshore jurisdictions with clearer regulatory frameworks.
For Bitcoin miners, the bill addresses only a subset of the competitive landscape, leaving untouched fundamental factors such as land availability, power contracts, permitting timelines, and grid reliability that determine where new megawatt-scale operations are established.
The staking tax problem
Under IRS Revenue Ruling 2023-14, validators and their clients owe ordinary income tax on staking rewards the moment they are received, at that day’s price, regardless of whether they have sold any tokens. In staking-as-a-service models, where institutional clients delegate tokens to a validator during bonding periods, the client faces a cash tax bill on assets they cannot yet liquidate, while the infrastructure provider owes tax on commission earned from those same illiquid tokens.
Jennie Levin, chief legal and operating officer at the Algorand Foundation and former staking-as-a-service operator, describes this as a “constant cash drag” where every reward on every network must be valued at receipt. If token prices fall before liquidation, the tax liability remains fixed at the higher initial value.
This framework solidified on June 4 when the U.S. Tax Court issued its first opinion directly addressing staking reward taxation. In Paschall v. Commissioner, T.C. Memo. 2026-46, the court determined that rewards constitute gross income under Section 61 when taxpayers gain dominion and control over them.
While the ruling is non-precedential and subject to challenge in pending cases like Jarrett v. United States, it arrives as Congress considers whether to legislate a different approach. H.R. 9175 would let taxpayers treat newly minted tokens as self-created property, deferring recognition until disposition.
The Blockchain Association, Crypto Council for Innovation, and The Digital Chamber endorse the bill as a balanced compromise that maintains ordinary-income classification while eliminating the tax-before-liquidity penalty driving U.S. staking infrastructure offshore.
If enacted, institutional clients could establish U.S.-based validation businesses without treating each reward cycle as a potential cash-flow crisis, an advantage most pronounced when asset prices are rising and phantom tax obligations on locked tokens are largest.
Switzerland and Singapore have already moved to provide clearer treatment, and they are marginally capturing institutional staking business as a result.
Levin highlighted the limits of the bill’s impact:
“The tax bill takes the US from punitive to viable; securities and custody clarity is what makes it competitive.”
The SEC’s Division of Corporation Finance issued a May 2025 statement noting that certain protocol staking activities do not involve securities offerings, and the agency rescinded SAB 121 in January 2025, which had required firms that custody digital assets to account for them as liabilities on their balance sheets.
Both moves reduced friction, though both remain staff-level guidance that a future Commission could reverse without formal rulemaking, leaving securities classification, custody rules, and licensing as unresolved barriers to a genuinely competitive U.S. validation sector.
Bitcoin mining follows infrastructure
President Donald Trump’s campaign pledge of “Bitcoin made in America” encountered physical reality: executives deploy capacity where power is cheap, land is permitted, and grid contracts hold for extended periods.
The U.S. held roughly 37.5% of global Bitcoin hashrate as of January 2026, maintaining the largest national share, while Paraguay grew 54% year-over-year to reach 4.3%, Ethiopia climbed to 2.5% and eighth globally, and CoinShares projects the network will hit 1.8 exahashes per second by year-end 2026 with Paraguay, Ethiopia, and Oman all entering the global top ten.
HIVE Digital Technologies operates with substantial capacity in Canada, Sweden, Paraguay, and the U.S., and CEO Aydin Kilic notes that the first priority is determining whether HIVE owns the land and can execute efficiently on-site, followed by off-taker demand and then long-term power availability and economics.
In the U.S., Kilic points to permitting and zoning efficiency, reliable power contracts at scale and attractive prices, and long-term grid certainty as competitive factors. The company’s Yguazú campus in Paraguay reached 300 MW of ANDE power agreements after securing land and utility relationships upfront.
In Sweden, HIVE signed a non-binding LOI for a potential up to 10-year lease of its Boden facility, covering 25 MW of critical IT load, with planned retrofitting for 10,000 NVIDIA GB300 GPUs, built on a long-term relationship with the national energy provider.
Both expansions followed the same logic: securing the power relationship first, then determining whether the site would run Bitcoin mining or high-performance computing.
Hashprice dropped to a record low of $27.89 per PH/s per day in the second quarter as Bitcoin fell roughly 50% from its October 2025 peak near $124,000, and CoinShares estimates that older-generation equipment operating at roughly $0.05/kWh ran at negative gross margins.
In Paraguay, Laos, and Finland, operations pairing newer hardware with genuine power cost advantages maintained profitability through the downturn, with hash prices at a record low of $27.89 per PH/s per day, making every efficiency advantage disproportionately valuable.
FERC’s move to require all six regional grid operators to justify or reform their interconnection rules for large loads, combined with ERCOT’s tightening oversight of crypto projects after reliability failures ahead of summer 2026, added costs and timelines to new U.S. buildouts.
Two bottlenecks
The tax-before-liquidity mechanism Levin describes has been a real driver of offshore structuring for institutional clients and the validators serving them, and Paschall confirmed that courts will enforce current law.
Senator Cynthia Lummis, one of the bill’s most consistent advocates in the Senate, departs in January 2027, making the window before the August recess the most realistic opportunity for passage.
