How to Stay Compliant with Crypto Tax Laws in the U.S. (Post-GENIUS Act)

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The United States has ushered in a new phase of digital asset regulation with the enactment of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act). Signed into law by President Donald Trump on July 18, 2025, this bipartisan legislation primarily establishes a comprehensive federal framework for the oversight of payment stablecoins. Its core objectives are to foster trust, enhance consumer protection, and solidify the U.S. dollar’s global leadership in the rapidly evolving digital finance landscape.

The GENIUS Act defines a “payment stablecoin” as a digital asset designed for payments or settlements, which an issuer is obligated to convert or redeem for a fixed monetary value, maintaining a stable peg to a fiat currency like the U.S. dollar. It aims to bring regulatory clarity to these assets, which have seen substantial growth, with U.S. dollar stablecoins exceeding $220 billion in outstanding supply by April 2025.

Key Provisions of the GENIUS Act (Stablecoins)

The GENIUS Act introduces specific requirements for stablecoin issuers:

Permitted Issuers: Only “permitted payment stablecoin issuers” (subsidiaries of insured depository institutions or federally/state-qualified non-bank entities) can issue stablecoins.

1:1 Reserve Backing: Issuers must maintain 100% reserve backing with high-quality, liquid assets such as U.S. currency, bank deposits, or short-term U.S. Treasury securities. Risky assets like corporate debt are prohibited.

Transparency & Audits: Issuers must publicly disclose redemption policies and publish monthly reports detailing reserve composition, certified by executives. Large issuers (over $50 billion outstanding) face additional annual audit requirements.

AML Compliance: Permitted stablecoin issuers are designated as “financial institutions” under the Bank Secrecy Act, requiring robust Anti-Money Laundering (AML), Know Your Customer (KYC), and sanctions compliance programs.

Consumer Protection: The Act grants stablecoin holders priority claims against reserves in the event of issuer insolvency and prohibits misleading marketing implying government backing.

Effective Date: The GENIUS Act is set to take effect on the earlier of January 18, 2027, or 120 days after federal regulators issue final implementing regulations.

Broader Cryptocurrency Tax Changes (Separate from GENIUS Act)

While the GENIUS Act focuses on stablecoins, separate and broader changes to cryptocurrency taxation are also enhancing IRS enforcement. Starting for the 2025 tax year (forms issued in early 2026), the IRS will implement mandatory reporting requirements for digital asset brokers. This expanded definition includes cryptocurrency exchanges, certain wallet providers, and payment processors. These entities will issue a new Form 1099-DA (Digital Asset Proceeds From Broker Transactions) to customers for sales or exchanges of digital assets, including crypto-to-crypto trades, typically for gross proceeds exceeding $600 annually. Brokers must collect customer identification (e.g., Social Security numbers) and will report gross proceeds, with cost basis reporting generally beginning in 2026.

Taxpayer Obligations and Penalties

It’s crucial for taxpayers to understand that all cryptocurrency transactions — including crypto-to-crypto trades, using crypto for purchases, mining, and staking activities — constitute taxable events. The fair market value of received cryptocurrency (e.g., from mining or staking rewards) must be included in gross income upon receipt. Capital gains and losses from digital asset dispositions are reported on IRS Form 8949 (“Sales and Other Dispositions of Capital Assets”) and summarized on Schedule D (“Capital Gains and Losses”). There is no IRS Form 8949-C.

Failure to report cryptocurrency transactions can result in significant penalties, including accuracy-related penalties (e.g., 20% of the underpayment) and severe criminal penalties for willful tax evasion (fines up to $250,000 and five years imprisonment). U.S. taxpayers must also continue to report foreign digital asset accounts exceeding $10,000 through FinCEN Form 114 (FBAR) and potentially Form 8938, with non-compliance penalties reaching up to 50% of the account balance.

To ensure compliance, crypto holders should maintain robust transaction tracking, utilize qualified crypto tax software, and consider consulting tax professionals specializing in digital assets.

Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses