After years of anticipation, cryptocurrency tax reporting has entered a new era. The IRS has finalized its long-awaited digital asset regulations, introducing Form 1099-DA, a brand-new reporting form that will significantly change how crypto transactions are tracked and taxed.

Beginning with the 2025 tax year, custodial crypto platforms will be required to report digital asset transactions directly to the IRS. The first Form 1099-DA filings will be due in March 2026, marking a major step toward increased transparency in crypto taxation.

Here’s what you need to know and how it may affect you.

Who Must Report Crypto Transactions?

The new rules apply to custodial digital asset brokers, meaning platforms that take possession of users’ crypto assets. These include:

• Centralized crypto exchanges such as Coinbase, Binance, and similar platforms

• Hosted (custodial) wallet providers

• Crypto kiosks and ATMs

• Crypto payment processors that handle customer funds

If a platform controls your private keys or temporarily holds your crypto during transactions, it likely falls under these reporting requirements.

Non-custodial platforms, decentralized exchanges (DeFi), and foreign brokers not controlled by U.S. persons are currently excluded.

Which Digital Assets Are Covered?

The IRS defines digital assets broadly. Reporting requirements apply to:

• Cryptocurrencies (e.g., Bitcoin, Ethereum)

• Stablecoins, if annual sales exceed $10,000

• NFTs, when gross proceeds reach $600 or more

Which Transactions Trigger Reporting?

Form 1099-DA will cover taxable crypto transactions conducted through custodial brokers, including exchanges for:

• Cash or cash equivalents

• Goods or services

• Other digital assets

• Stored-value cards

• Securities or, starting in 2026, real estate

Even routine crypto purchases such as paying for goods through a payment processor may be reported if annual totals exceed $600.

Certain complex activities, such as staking, wrapping, liquidity provision, and crypto lending, are temporarily excluded until further IRS guidance is issued.

What Information Will Be Reported?

Brokers must report key transaction details, including:

• Taxpayer identification information

• Type and quantity of digital assets sold

• Transaction dates

• Gross proceeds received

Starting in 2026, brokers will also report cost basis, making it easier for the IRS to verify capital gains and losses.

How Cost Basis and Gains Are Calculated

Cost basis represents what you paid for your crypto, including fees. Your taxable gain or loss is calculated by subtracting the cost basis from the gross proceeds.

The IRS defaults to the FIFO (First-In, First-Out) method unless you properly use specific identification. Under the new rules:

• Specific identification must be made at or before the time of sale

• For 2025 only, taxpayers may apply transitional relief if brokers cannot process identification instructions

• By 2026, brokers must fully support identification methods

Wallet-by-Wallet Tracking Is Now Required

Previously, many crypto owners tracked all assets as if they were held in a single wallet. That approach is no longer allowed.

Under the new regulations:

• Cost basis must be tracked separately for each wallet or exchange

• Crypto owners with multiple wallets must allocate existing basis using an IRS-approved method

• This allocation must be completed by December 31, 2025

What About DeFi Transactions?

Although the IRS briefly attempted to impose reporting requirements on certain DeFi platforms, those rules were officially repealed in 2025. For now, decentralized finance transactions remain outside the scope of Form 1099-DA reporting.

Key Takeaways

• Form 1099-DA introduces mandatory crypto transaction reporting starting in 2025

• Custodial brokers must report gross proceeds and later cost basis to the IRS

• Crypto owners must adopt stricter tracking and accounting methods

• Wallet-by-wallet basis tracking is now required

• Proper record-keeping is more important than ever

Final Thoughts

The arrival of Form 1099-DA signals a major shift in crypto tax compliance. While it simplifies reporting in some ways, it also places greater responsibility on crypto owners to maintain accurate records and understand their tax obligations.

If you trade, invest, or accept crypto payments, now is the time to prepare.