Kraken submitted 56 million crypto transaction forms to the U.S. Internal Revenue Service for the 2025 tax year, the exchange disclosed Wednesday, revealing a staggering administrative burden that falls heavily on individual investors. The supporting evidence appears in said in a Wednesday blog post.
Of those filings, approximately 18.5 million covered transactions valued at less than $1, and over half of all forms were for amounts of $10 or less.
The data, shared in a detailed policy blog post by Kraken, puts a stark number on what many crypto holders already experience during tax season: a flood of paperwork for transactions so small they generate no meaningful revenue for the government, yet still require full legal disclosure.
A Tax Framework Built for the Wrong Era
Only 8.5% of the newly introduced Form 1099-DA filings cleared $600, the threshold that typically triggers reporting requirements for non-employee compensation. Meanwhile, 74% of all forms covered transactions worth less than $50.
Each form goes not only to the IRS but also directly to the customer, creating a reconciliation task for every taxpayer who receives one.
Standard tax software does not handle cryptocurrency transactions, which means holders must pay for dedicated crypto tax tools. Kraken estimated that additional burden at $250 to $500 per year for an active crypto holder, layered on top of regular filing costs.
The Tax Foundation estimates individual returns already cost Americans a combined $146 billion in time and expenses annually, and the National Taxpayers Union Foundation places the average filing time for non-business filers at roughly 13 hours and $290 per return.
Kraken described the situation plainly: hours taxpayers spend reconciling micro-transactions, often with incomplete data, generate costs wildly disproportionate to any revenue the IRS will actually collect from them. The concern is not theoretical.
Brokers reporting for 2025 were required to provide gross proceeds without cost basis information, meaning the form shows what was sold but not what it was originally purchased for. The exchange said it fielded thousands of client questions about forms that captured only one side of the taxable calculation.
Two Code Problems Kraken Wants Congress to Fix
Kraken identified two specific provisions in the tax code as the root cause of the overload. The first is the absence of a de minimis exemption for small crypto payments.
Under current rules, even a minor everyday purchase made with cryptocurrency triggers a taxable event that must be reported.
Kraken illustrated the problem with a straightforward example: buying a $7.99 meal with Bitcoin through a payment app technically requires the buyer to look up the cost basis of that specific fraction of Bitcoin, calculate the gain or loss, and report it on Form 8949.
That kind of micro-reporting obligation has no equivalent in traditional finance for small consumer purchases, and it creates a chilling effect on real-world crypto adoption.
Every tap-to-pay transaction with a crypto wallet becomes a potential IRS filing event, a reality that discourages the everyday use cases that blockchain advocates have promoted for years.
The second problem involves staking rewards. Under current IRS guidance, staking rewards are taxed at the moment they are received, not when they are sold.
That means a holder earning staking rewards on tokens that later drop in value may owe income tax on an amount they never actually realized in purchasing power.
Kraken is advocating for Congress to allow taxpayers to elect when staking rewards are taxed, giving holders the option to defer recognition until the point of sale.
To address both issues, Kraken is calling on Congress to pass a broad, inflation-indexed de minimis tax exemption for crypto transactions and to reform the staking income rules.
The exchange argues these changes would reduce IRS administrative overhead as much as they would reduce the burden on individual filers, since the agency currently receives millions of forms covering amounts too small to audit or meaningfully collect on.
The broader policy debate over crypto taxation has intensified since the IRS rolled out Form 1099-DA as the standardized reporting vehicle for digital asset brokers.
The form was designed to bring crypto reporting in line with traditional securities reporting, but the sheer volume of micro-transactions in crypto, from staking yields to payment app purchases, makes direct comparisons to stock trading incomplete.
Exchanges, tax professionals, and industry advocacy groups have all flagged the mismatch, and Kraken’s filing data now gives that argument a concrete, nine-figure scale.
Whether Congress acts on the exchange’s proposals remains uncertain, but the 56 million forms Kraken filed for a single tax year make the legislative case harder to dismiss.
Not Financial Advice: This article is for informational purposes only. Crypto investments are highly volatile. Always do your own research.
