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The digital asset taxation landscape in the United States transformed significantly in 2025. On July 18, 2025, President Donald Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) into law, establishing a comprehensive federal framework for payment stablecoin oversight. While the GENIUS Act focuses specifically on stablecoin regulation, requiring 1:1 reserves and regular disclosures, separate changes to cryptocurrency taxation are enhancing IRS enforcement capabilities through new reporting requirements for all digital assets.
New Form 1099-DA Reporting Requirements
Starting for the 2025 tax year, the IRS implements mandatory reporting requirements for digital asset brokers. This expanded definition includes cryptocurrency exchanges, certain wallet providers, and payment processors that facilitate digital asset transactions for customers.
These entities must issue the new Form 1099-DA (Digital Asset Proceeds From Broker Transactions) to customers who engage in sales or exchanges of digital assets, including crypto-to-crypto trades, with proceeds typically exceeding $600 annually. Brokers must collect customer identification information, such as Social Security numbers and addresses, and report gross proceeds.
By 2026, brokers will also be required to report the cost basis of transactions where available, aligning digital asset reporting with traditional financial assets like stocks.
Taxpayer Documentation and Reporting Obligations
All cryptocurrency transactions constitute taxable events, including crypto-to-crypto trades, using crypto for purchases, mining, and staking activities. The fair market value of received cryptocurrency must be included in gross income upon receipt, particularly relevant for mining and staking rewards.
Comprehensive documentation requirements include maintaining records of the date, fair market value, nature of the transaction, and relevant wallet addresses for every digital asset transaction. Capital gains and losses from digital asset dispositions are reported on IRS Form 8949 and summarized on Schedule D.
Essential Compliance Strategies
Successful crypto tax compliance requires systematic approaches:
Establish robust tracking systems that capture all trade data and calculate cost basis accurately. Select a consistent accounting method—FIFO, LIFO, or specific identification—and apply it uniformly across all transactions.
Utilize qualified crypto tax software with direct exchange API connections and automated reporting capabilities. These platforms streamline complex calculations and ensure accurate form generation.
Consult tax professionals specializing in digital assets for substantial holdings or complex transactions involving DeFi protocols, NFTs, or cross-chain activities. Professional guidance ensures optimal tax treatment and penalty avoidance.
Penalties and Enforcement Risks
Non-compliance carries severe consequences. Failure to report cryptocurrency transactions can result in accuracy-related penalties of 20% of the underpayment, substantial fines for inadequate record-keeping, and criminal penalties up to $250,000 and five years imprisonment for willful tax evasion.
U.S. taxpayers must also 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.
The enhanced transparency from mandatory broker reporting represents a fundamental shift in digital asset taxation. Crypto holders who implement systematic tracking, maintain detailed documentation, and work with qualified professionals will navigate this regulatory environment successfully while avoiding substantial penalties. As the IRS strengthens enforcement through improved data collection, proactive compliance becomes essential for all digital asset participants.
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
