Coinbase Wrapped Staked ETH (cbETH) taxes

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


0 ETH reward


1.03 conversion rate

Balance = 1 ETH

Balance Value = $1,000

Income calculations

Income generated = $0

Balance = 0.9708737864 cbETH

Balance Value = $1,000


Income calculations

Income generated = $0

Day 3: Rewards distributions

0.00485436 ETH reward


1.035 conversion rate

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

Explanation:
If the total cbETH balance was unwrapped, it would result in 0.9708737864 * 1.035 = 1.00485436 ETH:

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


0.00485436 ETH reward


1.04 conversion rate

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

Explanation:
If the total cbETH balance was unwrapped now, it would result in 0.9708737864 * 1.04 = 1.00970872 ETH:

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 


Therefore, the income accumulated is ETH rewards * ETH price at conversion rate change = $4.85 (income from day 3) + 0.00485436 * $1,000 = $9.7