Defeating the Phantom Tax: How the Carey Bill Could Protect Your Staking Yields and Boost Ethereum Compounding

As digital asset validation sweeps through the financial landscape, a major legislative battle in Washington D.C. is poised to reshape the economics of cryptocurrency mining and staking. The introduction of the Tax Clarity for Mining and Staking Act, sponsored by Representative Mike Carey, aims to eliminate the painful phantom tax rules that currently force everyday investors and corporate staking giants alike to sell their assets prematurely to cover tax bills on unrealized gains. By allowing operators to defer tax payments until they actually sell their rewards, this proposal could unleash massive compounding power across proof-of-stake networks like Ethereum, where billions of dollars in digital assets are currently locked in validator contracts.

By Michael Nguyen | June 29, 2026

The Hardware/Software Landscape

Staking is a way to earn rewards by locking up digital coins to help secure a blockchain network. Think of it like putting money in a high-yield savings account, but instead of a bank, you are supporting a decentralized network. To participate in staking at a professional level, investors run a validator client. A validator client is a specialized computer program that processes transactions, stores data, and adds new blocks to the blockchain. Because validator nodes must remain online twenty-four hours a day, operators require reliable computer hardware and stable internet connections. Many everyday investors choose to avoid the hassle of running hardware by using staking pools or liquid staking protocols, which let them pool their assets with others to earn rewards.

On the corporate side, the hardware and software setups are far more complex. Large-scale companies like Bitmine Immersion Technologies operate massive data centers. They have launched their own specialized validator network called the Made in America Validator Network (MAVAN). MAVAN is a specialized system that runs validator nodes on a large scale. As of late June 2026, Bitmine has staked 4,879,157 ETH through MAVAN. This represents over 85 percent of their total treasury holdings of 5.70 million ETH.

For proof-of-work mining networks like Bitcoin, the hardware consists of specialized computers called ASICs (Application-Specific Integrated Circuits). An ASIC is a specialized computer designed solely for mining cryptocurrency. These ASICs solve complex puzzles to secure the network. Whether stakers run validator nodes or miners run ASIC machines, they use software that automatically deposits newly minted rewards into their wallets. Under current IRS guidelines, this simple software deposit triggers a highly complex tax problem.

Hashrate & Difficulty

Hashrate is the total computing power used to secure a proof-of-work blockchain like Bitcoin. Network difficulty is a self-adjusting measure of how hard it is to find a new block on the network. For proof-of-stake networks like Ethereum, the level of security and participation is reflected in the staking ratio, which measures the percentage of all circulating coins that are locked up in staking contracts. In early June 2026, Ethereum’s staking ratio reached an all-time high of 32.4 percent, with approximately 39 million ETH locked in validator contracts. However, the current tax regime threatens the stability of this participation.

Under the current IRS rules, specifically Revenue Ruling 2023-14, the IRS treats every newly minted reward as taxable income the exact moment it hits the validator’s wallet. This means stakers must track the fair market value of their tokens on a constant basis, even though they receive hundreds or thousands of tiny rewards throughout the year. When market volatility strikes, this creates a dangerous loop.

For example, if Ethereum is trading at 1,620.46 USD when a reward is received, the staker owes income taxes based on that 1,620.46 USD price. If the price of Ethereum subsequently drops, the staker still owes taxes based on the higher historical price. To protect themselves, many validator operators immediately sell a portion of their rewards to secure cash for their tax bills. This forced selling reduces the amount of capital that remains staked, which can lower the overall staking ratio and weaken network security. If the Carey bill passes, stakers will not be forced to sell their rewards immediately, allowing more capital to remain locked in the network, boosting the overall staking ratio and hashrate stability.

Profitability Metrics

To understand why this bill is a game-changer, let’s look at the money angle using an everyday analogy. Imagine you are a farmer who plants apple trees. As the season progresses, apples grow on the branches of your trees. Under standard U.S. tax law, the IRS does not tax you the moment an apple grows on the branch. You are only taxed when you pick the apples and sell them at the market. This is because the apples are considered self-created property.

However, the IRS currently taxes crypto stakers and miners the moment the “apple” grows on the branch. If you mine Bitcoin (trading at 60,186 USD) or stake Solana (trading at 75,47 USD), you are taxed on the reward the second it is created, even if you do not sell it. This leads to “phantom income”—paper gains that you are taxed on, but might disappear before you can cash out.

For large-scale operators, the numbers are staggering. Bitmine Immersion Technologies projects an annualized staking revenue of approximately 211 million USD from their staked ETH. Under current rules, they must pay corporate taxes on this 211 million USD throughout the year, even if they want to hold their ETH for the long term. This significantly reduces their compound interest.

What this means for you: If you stake altcoins like Cardano (trading at 0.1473 USD), Polkadot (trading at 0.8314 USD), or Chainlink (trading at 7.45 USD), you are subject to the same rules. If the Carey bill (H.R. 9175) passes, you can elect to defer these taxes. Instead of paying taxes on every single micro-reward throughout the year, you will only pay taxes when you sell. This allows you to reinvest 100 percent of your rewards, boosting your compound yields and simplifying your tax returns.

Environmental Impact

Crypto mining and staking require significant resources. Staking requires highly reliable data centers, while mining requires massive amounts of electricity to run ASIC machines. Because of this, energy efficiency is a top priority for the industry. However, the current tax rules drain capital that could otherwise be used for environmental upgrades. When operators are forced to sell their tokens to pay immediate taxes, they have less cash to invest in green infrastructure.

For instance, Bitmine Immersion Technologies is a leader in immersion cooling. Immersion cooling is a technology where servers are submerged in a special liquid that absorbs heat much better than air. This reduces the energy needed to cool the servers by up to 90 percent.

If the Carey bill passes, companies like Bitmine can defer millions of dollars in tax payments. Instead of sending that cash to the IRS to cover unrealized gains, they can reinvest it directly into energy-efficient equipment, renewable energy projects, and liquid cooling systems. For everyday investors, this means supporting networks that are both financially rewarding and environmentally sustainable.

Strategic Outlook

What lies ahead for the Tax Clarity for Mining and Staking Act? Introduced on June 8, 2026, by Representative Mike Carey (R-OH), H.R. 9175 has been referred to the House Committee on Ways and Means. The bill has received strong backing from major digital asset advocacy groups, including the Blockchain Association, the Crypto Council for Innovation, and The Digital Chamber. They argue that the bill is essential for keeping the United States competitive in the global digital economy. If U.S. tax laws remain overly complex and punitive, miners and validators will simply relocate to countries with friendlier tax policies, taking jobs and innovation with them.

However, the legislation faces challenges. Representatives from the banking sector have raised concerns that the bill could give digital assets preferential tax treatment compared to traditional investments like stock dividends, which are taxed when received. Here are the key facts regarding the current state of digital asset staking and the proposed legislation:

• H.R. 9175 — The official designation of the Tax Clarity for Mining and Staking Act, introduced by Representative Mike Carey on June 8, 2026.
• 32.4 percent — The record-high Ethereum staking ratio reached in early June 2026, representing about 39 million ETH locked in validator contracts.
• 4,879,157 ETH — The amount of Ethereum staked by Bitmine Immersion Technologies, accounting for over 85 percent of its total holdings.
• 211 million USD — The projected annualized staking revenue for Bitmine Immersion Technologies, highlighting the massive scale of corporate staking.

What this means for you: While Congress debates the bill, you must continue to follow current IRS guidelines. Keep detailed logs of all your mining and staking rewards, and consider using crypto tax software to automate the process. If the Carey bill passes, it could usher in a new era of growth for the digital asset industry, making staking and mining far more profitable and less stressful for retail investors.

Disclaimer

The cryptocurrency market remains highly volatile. This article is for informational purposes only and does not constitute financial advice.