Digital Transactions in Focus: How New US Rules Include Cryptocurrency in Tax Reporting

WASHINGTON — A new wave is coming, and it’s digital. The U.S. Treasury and Internal Revenue Service (IRS) recently issued final regulations stipulating that brokers who handle cryptocurrencies and other digital assets are now required to report sales and transactions. Naturally, you might ask – why is this happening and how might it impact the average consumer? Let’s dive in.

First, it has its roots in an age-old principle of taxation: all income is taxable. The digital sphere is not exempt. The explosion of cryptocurrencies and digital assets has forced the IRS to introduce regulations to ensure that these transactions are properly reported for tax purposes.

Reflecting the voice of the people, these regulations were developed based on feedback from more than 44,000 public comments received on the original proposal. The new mandate is set to begin in 2025 and will use the future Form 1099-DA to report these transactions.

The goal, according to IRS Commissioner Danny Werfel, is to close the digital tax gap. “This legislation will improve the detection of noncompliance in the high-risk digital asset space,” he said, explaining how third-party reporting tends to increase compliance. The goal is to ensure that the lucrative digital asset space doesn’t become a haven for hiding taxable income.

But it’s not just about cracking the whip. Werfel says the rules will also help taxpayers by reducing the burden and streamlining reporting of digital asset activity.

IRS operations are a critical part of maintaining the integrity and robustness of our tax system. As the digital landscape evolves, so does complexity. To keep up, the IRS needs reliable funding. These regulations are designed to balance resource investments while saving more in the long run by catching potential instances of noncompliance.

So who are the brokers that this new regulation will affect? ​​The focus is on custodial brokers, including those that operate digital asset trading platforms, some digital asset wallet providers, digital asset kiosks, and some digital asset payment processors (PDAPs). For now, brokers that specialize in non-custodial or decentralized transactions are not included.

The IRS has included transitional and penalty relief to support the implementation of new reporting requirements and address the complexities of the digital asset market.

The regulations are broad in scope and also cover real estate professionals, who will be required to report the fair value of digital assets in transactions from 2026.

It’s worth noting that the regulations take into account the nuances of the digital space. Optional aggregate reporting will be allowed for certain sales of stablecoins and non-fungible tokens (NFTs) that exceed a certain minimum threshold. Transaction-based reporting will only be required when a customer sale exceeds a similar threshold.

In short, times are changing, and the IRS is evolving with them. These regulations are the IRS’s attempt to keep pace with the rapidly expanding digital frontier while ensuring fairness, compliance, and protection for all taxpayers navigating the world of digital currencies.

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