The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have provided final regulations that require custodial brokers to report sales and exchanges of digital assets, including cryptocurrency. These requirements will be implemented in transactions starting from 2026 for all sales in 2025 with the view to improving compliance with existing tax laws by taxpayers.
The new regulations, influenced by over 44,000 public comments, will be reported on the new Form 1099-DA. The Infrastructure Investment and Jobs Act of 2021 initiated these reporting requirements. Danny Werfel, the current IRS Commissioner applauded the rules citing that they respond to public anxiety as they consider the concerns surrounding the industry implementation and the tax gap within the digital asset segment.
Brokers, including custodial digital asset trading platforms, hosted wallet providers, and digital asset payment processors (PDAPs), must report transactions where they take possession of digital assets. Non-custodial and decentralized brokers are currently exempt, with future regulations expected to address these entities.
The regulations are gain and loss from digital asset transactions and backup withholding. Transitional and penalty relief measures are included to ease implementation challenges. Real estate professionals must report the fair market value of digital assets in transactions from January 1, 2026.
An optional aggregate reporting method is available for certain stablecoins and non-fungible tokens (NFTs), applicable after sales exceed de minimis thresholds. PDAP transactions require reporting only if sales surpass these thresholds.
Also Read: Consensys Asks IRS to Postpone Crypto Tax Regulation
