New IRS Rules for People who Sell or Exchange Cryptocurrency

The IRS, the Treasury Department and others are implementing new rules to enhance transparency, reduce tax evasion, and ensure compliance in the digital asset space. It is critical that tax professionals, accountants, and small business owners stay up to date and informed about such changes to help their clients navigate the changing landscape.

Here are some of the new IRS Reporting Rules for Cryptocurrency in 2025.

Starting January 1, 2025, cryptocurrency exchanges and digital asset brokers must report their customers’ sales transactions to the IRS using the new Form 1099-DA. For tax year 2025, Form 1099-DA will only need to report gross proceeds from cryptocurrency sales; starting tax year 2026, the form will also need to include cost basis information to help the IRS calculate the gains or losses from trades.

Exemptions: On April 10, 2025, President Trump signed legislation that exempted the Form 1099-DA reporting requirement on decentralized finance (DeFi) brokers (Note: under the Infrastructure Investment and Jobs Act of 2021, the definition of “broker” included “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”)  In general, the exemption applies to DeFi brokers that operate almost entirely on blockchain infrastructure and do not provide traditional on or off ramps from fiat currency to digital assets. Some of the most well-known of these DeFi brokers include Uniswap, Aave, MakerDAO, Compound and SushiSwap. Centralized exchanges that custody digital assets for their customers and offer customers the ability to move from fiat currency to digital assets, such as Binance, Coinbase, Kraken, Gemini and Crypto.com, remain subject to the Form 1099-DA information reporting obligations starting January 1, 2025.

As outlined in Revenue Procedure 2024-28, the previously allowed so-called universal wallet method to track the cost basis of a taxpayer’s cryptocurrency sales is gone. As such, taxpayers no longer will be able to track the basis of their digital assets as if they were held in a single account or address. Instead, starting January 1, 2025, taxpayers must now use a wallet-by-wallet accounting method for tracking the cost basis of their digital assets. What this means is that without specific identification prior to or at the time of sale, brokers must apply the first-in, first-out (FIFO) rule to track basis on the digital assets held in the taxpayer’s account. Under these new rules, taxpayers need to identify the specific digital assets they are selling or risk owing large amounts of capital gains tax.

Even though the wash sale rule does not apply to cryptocurrency currently, on the most current version of the Form 1099-DA there is a box (Box 1i.) for reporting losses from wash sales hinting that this rule is set to change.

As one can see, the IRS is tightening its grip on cryptocurrency transactions, making it critical for individuals, professionals and advisors dealing with digital assets to keep up to speed with the ever-changing evolving tax regulations.