What You Need to Know
- Staking is a way to earn passive income on cryptocurrency in exchange for locking it up for a period of time.
- The IRS treats money earned through staking as ordinary income.
- Risks of staking include exposure to crypto price volatility and illiquidity of staked assets.
As cryptocurrency continues to become more widely accepted within the mainstream investing community, both institutional and retail investors are looking at different strategies to boost their returns or find passive income within the crypto markets. One such strategy is crypto staking.
If it’s not something your clients have asked about yet, prepare for the questions to come. Nearly half of advisors said their clients asked about crypto assets in 2021, up from just 17% of advisors in who said the same in 2020, according to the Financial Planning Association. As they learn more about the space, they’re likely to ask you about crypto staking as well. This guide can help you answer their questions.