On April 18, 2022, the New York State Bar Association (“NYSBA”) Tax Section published its second report on cryptocurrency and digital assets (“the Report”). The Report recommends:

• Cryptocurrency loans that satisfy similar requirements to Section 1058(b) should be granted nonrecognition treatment;
• Specific guidance clarifying (i) that staking rewards should generally be treated as includable as gross income when received at their then fair market value and (ii) how staking income is sourced;
• The Section 864(b)(2)(B) commodities trading safe harbor should be expanded to include trading of cryptocurrency;
• Treasury should consider a general rule treating cryptocurrencies as commodities for federal income tax purposes if they are subject to CFTC jurisdiction, except where the Code contemplates cryptocurrencies as a separate asset class or Treasury provides otherwise;
• Fungible cryptocurrency traded on certain exchanges should be treated as actively traded property for purposes of the Section 1092 straddle rules;
• Mark-to-market elections under Sections 475(e) and (f) should be made available to dealers and traders in respect of such actively traded cryptocurrencies; and
• U.S. dollar pegged “stablecoins” should be treated as debt for federal income tax purposes as long as the stablecoins have certain legal enforcement rights and high quality collateralization.

The Report is available online here, and the prior NYSBA Tax Section report is available online here.