The IRS has finalized its long-awaited digital asset broker reporting regulations, requiring all US cryptocurrency exchanges β including Coinbase, Kraken, Gemini, and Binance US β to report customer transactions to the agency using a new 1099-DA form beginning with the 2025 tax year. The rules mark the most significant change to US cryptocurrency taxation since the IRS issued initial crypto guidance in 2014.
Under the new rules, every sale, exchange, or disposition of a digital asset must be reported to the IRS by the broker who facilitated the transaction, much like how stock brokers report securities sales on Form 1099-B. Crypto exchanges must report the proceeds and cost basis of each transaction, making it dramatically harder for US taxpayers to under-report crypto gains.
The practical implications for American crypto investors are significant. The IRS estimates that the US has 25 million crypto investors, of whom it believes only 8-12 million have been accurately reporting their crypto gains. The new reporting regime is expected to generate $28 billion in additional tax revenue over the next decade.
DeFi (decentralized finance) protocols face more complex treatment. The IRS has proposed rules treating DeFi platforms as brokers when they maintain sufficient control over transactions, but implementation challenges are significant and enforcement is expected to lag the centralized exchange rules by 2-3 years.
