Lido stETH vs wstETH: rebases, wrapping and withdrawals for accountants

stETH balances change daily; wstETH balances do not. How each works, how withdrawals settle, and the open accounting and tax questions.

2026-10-16 · 6 min read

If your treasury holds Lido staked ETH, the form you hold it in changes what your records show. stETH changes your balance every day with no transfer recorded on-chain; wstETH keeps the balance fixed and lets the value per token rise. Both raise questions that tax authorities and standard setters have not fully answered.

stETH: a balance that rebases

stETH is a rebasing token. Each holder actually owns shares in the ether Lido controls, and the displayed stETH balance is calculated from those shares [1]. Balances are recalculated daily when the Lido oracle reports validator balances, so every holder's balance changes at once [1].

Two details matter for reconciliation. First, a rebase does not emit a Transfer event, so a ledger built only from token transfers will miss the daily changes [1]. Second, balances can fall as well as rise: if Lido validators are slashed or penalised, stETH balances can decrease [1]. There is also a rounding quirk where transferring a full stETH balance can leave 1 to 2 wei behind [1].

wstETH: a fixed balance with a rising rate

wstETH wraps stETH into a token that does not rebase. Your wstETH balance changes only on transfers, mints and burns, while the amount of stETH each wstETH is worth rises over time [1]. That rate is available on-chain through the stEthPerToken function and updates daily after each rebase [1]. Unwrapping burns wstETH and releases the corresponding stETH [1]. Lido suggests integrations use wstETH unless they deliberately support rebasing [1].

Withdrawals: a queue, not an instant swap

To exit to ETH through Lido, you lock stETH or wstETH in the withdrawal queue and receive an NFT representing your request [2]. Once the request is finalised you claim ETH and the NFT is burned [2]. Tokens stop earning rewards while queued [2]. Finalisation can come in below one-to-one if the protocol suffers significant validator losses, though Lido says this has not happened historically [2].

The accounting and tax questions

Is a rebase income? US IRS Revenue Ruling 2023-14 holds that a cash-method taxpayer includes staking rewards in gross income at fair market value when it gains dominion and control [3]. The ruling addresses validators and staking through an exchange; it does not address liquid staking tokens or rebasing [3]. Whether each daily stETH increase, or the rising wstETH rate, is a reward received, and when, is therefore a judgment call as of October 2026.

HMRC treats staking rewards received by individuals as income valued in sterling at receipt [4]. Its staking guidance does not discuss liquid staking tokens or rebases [4]. Separately, HMRC's guidance on the international crypto reporting framework treats wrapping and liquid staking as exchanges of one cryptoasset for another for reporting purposes [5]; that is a reporting classification, not a ruling on capital gains. The July 2026 UK no gain, no loss paper covers lending, borrowing and liquidity pool arrangements and does not mention staking [6].

For US GAAP, ASU 2023-08 fair value applies only to assets meeting all six scope criteria, including no enforceable rights to underlying assets [7]. Wrapped tokens that give a claim on another asset are likely out of scope, so stETH and wstETH each need an asset-by-asset assessment [7].

• Rebase as income: recognise each increase (daily or at period end) at fair value; this gives a basis for the new units.
• Rebase recognised later: defer recognition until disposal or withdrawal; simpler, but tax authorities may disagree for income purposes.
• Wrapping as a non-event: carry basis from stETH to wstETH, because the economic exposure is unchanged.
• Wrapping as a disposal: record a gain or loss at fair value on wrap and unwrap; more conservative where your jurisdiction treats token exchanges as disposals.

What to do

• Decide and document whether rebases or rate growth are recognised as income, and how often.
• For stETH, record daily balances or shares from on-chain reads, not transfers, so rebases are captured.
• For wstETH, store stEthPerToken at each recognition date and the price source used.
• Keep withdrawal NFT IDs, request and claim dates, and amounts, and note that queued tokens earn nothing.
• Treat any negative rebase as a loss event to review, not a data error.
• Agree your wrapping policy with your tax adviser for each jurisdiction you file in.

Sources

1. Lido Tokens Integration Guide (Lido)
2. WithdrawalQueueERC721 (Lido)
3. Rev. Rul. 2023-14 (26 CFR 1.61-1: Gross income) (IRS)
4. CRYPTO21200 - Cryptoassets for individuals: Income Tax: staking (HMRC)
5. IEIM8000555 - Wrapping and liquid staking (HMRC)
6. Tax treatment of Cryptoasset Loans and Liquidity Pools (HM Revenue & Customs (GOV.UK))
7. 2.3 Crypto Assets Within the Scope of ASU 2023-08 (Deloitte DART)

General information for finance teams, current as of publication. Not legal, tax or accounting advice.

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