How the IRS expands the definition of “broker” in digital asset transactions

The Infrastructure Investment and Jobs Act (Public Law 117-58), specifically Section 80603, broadened the definition of “broker” under Internal Revenue Code Section 6045 to include those facilitating digital asset transfers. 

Internal Revenue Service regulations broadly define brokers as entities engaged in digital asset sales or exchanges. Here is a timeline of the regulations:

Custodial brokers (June 2024 — Treasury Decision 10000)

Custodial brokers include operators of custodial digital asset trading platforms, such as centralized exchanges (CEXs) that hold customers’ private keys. It extends to hosted wallet providers, digital asset kiosks (e.g., Bitcoin ATMs) and certain processors of digital asset payments, such as crypto payment processors. These entities must report because they have custody, making it feasible to track transactions.

DeFi brokers (December 2024 — Treasury Decision 10021)

The IRS’s December 2024 regulations focus on trading front-end service providers in the DeFi ecosystem, such as interfaces that connect users to decentralized exchanges (DEXs). The Treasury and IRS use a three-part model (interface, application, settlement layers) to identify DeFi participants, focusing on those with sufficient control or influence, aligning with Financial Action Task Force (FATF) guidance.

However, as DeFi platforms lack centralized control, there were concerns about privacy and compliance. 

Efforts to repeal the IRS broker rule

In March 2025, discussions on repealing the DeFi broker rules intensified, with the Senate voting 70–27 on March 4 and the House voting 292–132 on March 11, to repeal the DeFi broker rules under the Congressional Review Act (CRA), as detailed in House Vote on Repeal. 

President Donald Trump has signaled support, with his crypto czar, David Sacks, affirming the administration’s backing to the repeal. If signed, this repeal would permanently bar the IRS from implementing similar regulations, significantly impacting DeFi reporting.

With bipartisan support, including 76 Democrats joining Republicans in the House vote, this reflects broader political shifts toward supporting crypto innovation, especially under President Trump’s pro-crypto stance, as seen in his executive order for a national crypto stockpile.

Did you know? Five draft Forms 1099-DA and three draft Final Instruction versions preceded the finalized IRS crypto broker rules. On Jan. 8, 2025, the IRS issued updated 2025 General Instructions for Certain Information Returns, which included instructions for Form 1099-DA.

What is Form 1099-DA? The new crypto tax form for 2025

Form 1099-DA, titled “Digital Asset Proceeds from Broker Transactions,” is a new tax form introduced by the IRS to standardize the reporting of digital asset transactions, such as those involving cryptocurrencies. It was released on Dec. 5, 2024.

It’s designed to help taxpayers accurately report their gains or losses from selling or exchanging digital assets and to ensure the IRS can track this income more effectively. Think of it as a specialized version of other 1099 forms — like the 1099-B used for stocks — but tailored for the unique world of crypto and other blockchain-based assets.

The form requires “brokers” (like crypto exchanges or platforms) to report specific details about your digital asset sales or exchanges to both you and the IRS. For transactions in 2025, brokers must report:

• Customers’ name, address and Taxpayer Identification Number (TIN)
• The date and time of each transaction
• The amount and type of digital asset sold (e.g., Bitcoin, Ether), including a unique nine-digit code from the Digital Token Identification Foundation (DTIF) to identify it
• The gross proceeds (the total amount customers received in US dollars) from the sale.

Along with the crypto brokers, if you (i.e., a taxpayer resident in the US) sell or swap crypto through a broker, you’ll get a Form 1099-DA to use when filing your taxes. You’re still responsible for reporting all taxable crypto events, even if no form is issued (e.g., for trades on non-reporting platforms).

Key dates include:

• Gross proceeds reporting: Begins for transactions on or after Jan. 1, 2025, with reports due in early 2026. This means you’ll receive your first Form 1099-DA for 2025 trades, due to you by Jan. 31, 2026, and to the IRS by Feb. 28 (or March 31 if filed electronically).
• Basis reporting: Starts for transactions on or after Jan. 1, 2026, including cost basis and gain/loss character for certain brokers.

Why is this new form required?

Before Form 1099-DA, crypto tax reporting was a mess. Some exchanges issued Forms 1099-MISC or 1099-B, while others provided nothing, leaving taxpayers to manually track their trades. This inconsistency made it hard for people to report accurately and for the IRS to verify income. Thus, it’s part of a broader push to close the tax gap and bring crypto in line with traditional financial reporting.

Did you know? Unlike stock reporting, where Form 1099-B covers everything cleanly, crypto’s decentralized nature and lack of universal identifiers posed challenges. Form 1099-DA tackles this with the DTIF code and a focus on digital assets — defined as any blockchain-recorded value, like cryptocurrencies or non-fungible tokens (NFTs), but not cash.

How Form 1099-DA shifts crypto reporting

On Jan. 10, 2025, the IRS released the final version of Form 1099-DA, titled “Digital Asset Proceeds From Broker Transactions.” Brokers have been instructed to use this form to report specific digital asset transactions occurring from 2025 onward. 

Herein are the key highlights of the new Form 1099-DA and its implications:

Transition rule for tokenized securities

Digital assets previously reported under Form 1099-B, such as tokenized securities, must now shift to Form 1099-DA. For instance, sales of tokenized stocks or bonds should be reported on Form 1099-DA instead of Form 1099-B. 

However, a transitional rule for 2025 allows brokers to report cash sales of tokenized securities on either Form 1099-B or Form 1099-DA. This flexibility gives traditional brokers — who may not typically handle digital assets — extra time to update their systems for full compliance by 2026, as outlined in Treasury Decision 10000.

Exception in tokenized securities rule

An exception to the general rule applies to tokenized securities settled or cleared on a Limited-Access Regulated Network (LARN). These transactions must be reported on Form 1099-B, not Form 1099-DA. 

If a LARN loses its regulated status, brokers can continue using Form 1099-B for affected transactions through the end of that calendar year, ensuring consistency during regulatory shifts.

Customer-provided acquisition information

Form 1099-DA includes a new checkbox (Box 8) that brokers must mark if they relied on customer-provided acquisition information to calculate the basis. 

This ties to final regulations allowing brokers to use such data for specific identification — pinpointing what units were sold or transferred — and requires them to disclose its use. This change, per Treasury Decision 10021, helps taxpayers align their records with broker reports.

Did you know? According to the 2025 General Instructions, Form 1099-DA electronic filing is required through the Information Reporting Intake System (IRIS), and Filing Information Returns Electronically System (FIRE) is not an option.

Noncovered status

Like Form 1099-B, Form 1099-DA requires brokers to indicate in Box 9 if a digital asset is a “noncovered security,” meaning its basis isn’t reported to the IRS. 

Unlike earlier drafts, the updated form no longer requires an explanation in Box 10 for this status — Box 10 is now reserved for future use. This simplifies reporting for assets acquired before basis tracking rules apply (e.g., pre-2026 purchases).

Number of decimal places

Brokers were earlier required to report the number of units of digital assets sold and transferred up to 10 decimal places. This requirement has been extended to 18 decimal places, reflecting the precision necessary in reporting digital asset transactions.​

Proceeds clarification

Total proceeds from the digital asset transaction should exclude gross proceeds from the initial sale of a specified non-fungible token (NFT) created or minted by the recipient. These amounts are instead reported separately in Box 11c, distinguishing creator earnings from secondary sales, per updated instructions.

Transfer date 

Box 12b records the date digital assets were transferred into a custodial account. The final instructions specify that this box should be left blank if the digital assets were transferred on various dates, accommodating scenarios where multiple transfers occur.​

Qualifying stablecoins and specified NFTs

Optional reporting for sales of qualifying stablecoins and specified NFTs comes with specific instructions. For specified NFTs, brokers enter code “999999999” in Box 1a and “Specified NFTs” in Box 1b. This ensures unique assets, like rare digital collectibles, are tracked distinctly from cryptocurrencies or stablecoins.

Applicable checkbox on Form 8949

Brokers must use new codes — G, H, J, K and Y — on Form 1099-DA to match the recipient’s Form 8949 (Sales and Other Dispositions of Capital Assets) for the tax year. These codes help taxpayers correctly categorize gains or losses, linking broker reports to tax filings seamlessly.

Did you know? If asset sales remain unspecified, the IRS will apply first-in, first-out, which might lead to the taxpayer paying higher taxes.

How IRS crypto broker rules affect taxpayers

The IRS rolled out new cryptocurrency tax reporting rules effective Jan. 1, 2025, targeting brokers and investors with stricter record-keeping and reporting requirements. These changes aim to boost tax compliance and ensure digital asset transactions are reported accurately, bringing crypto in line with traditional financial assets. 

Here’s what’s new and what it means for you.

• Cost basis tracking per account: Under the updated rules, crypto investors must now track their cost basis — the original purchase price — separately for each account or wallet, ditching the old universal tracking approach. For every transaction, you’ll need to record the purchase date, acquisition cost and specific details, like the wallet it’s tied to. Starting in 2025, brokers — like centralized exchanges — must report these transactions to the IRS using Form 1099-DA, mirroring how banks report stock trades. This shift, detailed in Treasury Decision 10000 (June 2024), closes loopholes by tying gains to specific accounts, making it harder to obscure taxable events.
• Specific identification required for transactions: The new regulations require taxpayers to use specific identification for each digital asset sale, pinpointing the exact purchase date, amount and cost of the asset sold. If you don’t provide this, the IRS defaults to the first-in, first-out (FIFO) method — selling your oldest coins first — which could inflate taxable gains if early purchases had lower costs. Previously, many investors averaged their cost basis across all holdings, a simpler but less precise method. This change, effective in 2025, demands detailed records to avoid unexpected tax bills.
• Temporary safe harbor: To ease the switch, the IRS offers a temporary safe harbor under Revenue Procedure 2024-28. If you’ve been using a universal cost basis method, you have until Dec. 31, 2025, to reallocate your basis across accounts or wallets accurately. This one-time grace period lets you adjust records without penalty, but you’ll need to act fast — brokers won’t report basis until 2026 transactions, so 2025 is on you to get it right.
• Penalties for noncompliance: Messing up these rules comes with a cost. The IRS has upped the stakes for 2025, increasing fines for underreporting crypto income, adding interest on unpaid taxes, and ramping up audits for mismatched gains and losses. Notice 2024-56 provides penalty relief for brokers making a good faith effort in 2025, but taxpayers don’t get the same leniency — noncompliance could trigger scrutiny, especially with Form 1099-DA giving the IRS clearer data to cross-check.

Notably, the IRS’s updated crypto broker rules also affect non-domiciled taxpayers — those living outside the US but subject to IRS reporting — by mandating detailed cost basis tracking for each account and specific identification of digital asset sales on Form 1099-DA, regardless of where they reside. 

For example, a US citizen in Europe or a foreign national with US-based crypto income must now maintain precise records of purchase dates and costs per wallet, facing increased compliance efforts and potential tax obligations on US-sourced gains.

From tracking cost basis per account to facing steeper penalties, these changes aim to align crypto with traditional finance, offering a brief safe harbor to adapt but signaling a clear shift: Compliance is no longer optional, and the tax net now stretches globally, leaving little room for oversight as the crypto landscape matures.