While the IRS hasn’t issued formal rules for wrapped assets like Coinbase Wrapped Staked ETH (cbETH), Coinbase treats cbETH income accumulation as if the balance was held in staked ETH.
You can see your cbETH income in the Coinbase Tax Center.
Note:
The unwrapping conversion rate increases at a similar cadence as ETH staking rewards distribution. Read more about how conversion rate is calculated.
The Coinbase Tax Center only tracks income from cbETH you hold on Coinbase.com, not cbETH you hold in a self-custody wallet, such as Coinbase Wallet.
If you qualify to receive a 1099-MISC form, Coinbase includes cbETH income on the 1099-MISC form we issue you.
Income calculating example
*This example is not representative of any actual customers
Bob buys 1 ETH for $700. On Day 0 he decides to stake the 1 ETH. For ease of calculation, we’ll assume the prices of ETH and cbETH stay consistent overtime; ETH price = $1,000 and cbETH price = $1,030.
Bob has two options: keep the staked ETH or wrap it to cbETH.
Here’s how the income is calculated in both scenarios.
Event | Keep balance in staked ETH | Wrap to cbETH |
|---|---|---|
Day 0
| Balance = 1 ETH Balance Value = $1,000 Income generated = $0 | Balance = 0.9708737864 cbETH Balance Value = $1,000 Income calculations Income generated = $0 |
Day 3: Rewards distributions
| Balance = 1 ETH + 0.00485436 ETH (reward) = 1.00485436 ETH Balance Value = $1,004.85 Income calculations Income generated = $4.85 | Balance = 0.9708737864 cbETH Balance Value = $1,000 Income calculations Income generated = $4.85 1 ETH from the original wrapped token 0.00485436 ETH rewards Therefore, the income accumulated is ETH rewards * ETH price at conversion rate change = 0.00485436 * $1,000 = $4.85 |
Day 6: Rewards distributions
| Balance = 1 ETH + 0.00485436 ETH (reward day 3) + 0.00485436 ETH (reward day 6) = 1.00970872 ETH Balance Value = $1,009.7 Income calculations Income generated = $9.7 | Balance = 0.9708737864 cbETH Balance Value = $1,000 Income calculations Income generated = $9.7 - 1 ETH being the original wrapped one - 0.00485436 ETH would be the rewards from day 3 - 0.00485436 ETH would be the rewards from day 6
|
Day 7: Selling your Staked ETH/cbETH | Unstaking and selling your Staked ETH would result in several liquidations: - The 1 ETH you staked originally - The 0.00485436 ETH you earned on Day 3 - The 0.00485436 ETH you earned on Day 6 Coinbase liquidates the tax lots for these assets according to the cost basis method (e.g. HIFO/FIFO/etc.) you have set in Tax Center. | Selling your cbETH would result in the liquidation of: - Your cbETH - The rewards you accumulated while holding cbETH Coinbase liquidates the tax lots for these assets according to the cost basis method (e.g. HIFO/FIFO/etc.) you have set in Tax Center. Explanation: When you earn a reward while holding cbETH, Coinbase assigns an acquisition date and cost basis to that reward. That way, when you sell your cbETH, Coinbase can account for both the “principal” cbETH you are selling and the rewards you earned while holding it. |