stETH is the liquid staking token issued by Lido. Deposit ETH with Lido and you receive stETH one for one, and the balance in your wallet grows daily as staking rewards accrue. stETH can be sold, lent or supplied to a pool while the ETH behind it stays staked.
stETH rebases. Lido updates balances daily to reflect what its validators earned, so the number of stETH in your wallet rises without any transaction you sent. Each stETH stays close to the value of one ETH, and the growth shows up in quantity rather than price. That makes it the most widely held liquid staking token and the one most likely to appear in a DeFi report.
wstETH is the wrapped version, built for protocols that cannot handle a changing balance. It holds the balance fixed and lets the value rise against ETH instead, which is the same rewards expressed the other way round.
stETH trades on the open market and does not always sit exactly at parity with ETH. It has traded at a discount during periods of stress, which is a price difference on a real asset rather than a fault in the peg.
The IRS has not addressed it, so it cannot be presented as settled.
The case for a taxable exchange is that ETH and stETH are separate tokens with separate contract addresses and separate market prices, and section 1001 treats an exchange of one property for another as a realisation event.
The case against is that stETH records ETH you still own and can redeem, so nothing has left your ownership. Direct redemption through Lido became possible once Ethereum allowed withdrawals, which strengthens that reading without confirming it.
The rewards are a separate matter and the guidance there is clearer. Under Revenue Ruling 2023-14, staking rewards are included in gross income when you gain dominion and control over them. Each daily rebase adds tokens you can sell immediately, which is a strong case for income as it accrues.
Daily rebasing generates roughly 365 income events per wallet per year, none of them a transaction you signed. Wallet and exchange imports rarely carry them. The usual outcome is stETH sitting in a report with the cost basis of the original ETH and none of the accrued rewards recorded, so the income is missing and the eventual disposal shows a gain that is really unreported income wearing the wrong label. Anyone holding stETH across a full year should expect this to need hands-on work.
Read our 2026 Guide to DeFi Taxes
CountDeFi specializes in complex DeFi tax accounting, including rebasing tokens, liquidity pools and multi-chain activity. See pricing.
