Crypto Broker Reporting Rules

The Infrastructure Investment and Jobs Act of 2021 expanded IRS broker-reporting requirements to cryptocurrency exchanges, requiring them to file Form 1099-DA for customer transactions—a shift that brought crypto into the same reporting regime as traditional securities.

The infrastructure bill reshaped crypto tax reporting

In November 2021, Congress passed the Infrastructure Investment and Jobs Act. While the legislation primarily concerned roads and bridges, it included a little-noticed but sweeping provision: the definition of “broker” was expanded to include persons or entities effecting transactions in digital assets. This expansion was designed to close what many saw as a reporting gap—crypto exchanges and custodians were not required to report customer transactions to the IRS in the same way that stock brokers and banks did.

Prior to this change, if you bought and sold Bitcoin on an exchange, the exchange had no obligation to report your gains or losses to the IRS. The IRS knew about the transaction only if you reported it yourself on your tax return—and many traders did not. The statutory expansion aimed to bring crypto into the light by requiring exchanges to furnish transaction data to both the customer and the IRS, much like a brokerage does with stocks.

1099-DA: The new form for digital assets

The IRS proposed Form 1099-DA (Digital Asset) to standardise reporting across crypto exchanges and brokers. Unlike the loose reporting that existed before, 1099-DA is meant to report:

• The name and value of each digital asset sold
• Gross proceeds from the sale
• Cost basis of the asset (if the broker has that information)
• Net gain or loss
• The date of the transaction

The form follows the template of Form 1099-B (used for stock and mutual-fund sales), adapted for the idiosyncrasies of crypto. For example, a single 1099-DA might report a customer’s purchase, sale, and staking income for Ethereum in a single year.

The proposed threshold for reporting is transactions totalling more than $20,000 per asset per exchange per year. However, this threshold has been subject to debate, and the final rules—still being finalised as of early 2026—may differ.

Who must report and when

Crypto exchanges, custodians, and other “digital-asset brokers” are now required by law to report. This includes:

• Centralised cryptocurrency exchanges (Coinbase, Kraken, etc.)
• Decentralised finance platforms (to the extent they have custodial control)
• Crypto payment processors
• Cryptocurrency lending platforms
• Wallet providers that facilitate transactions
• Staking-as-a-service providers

The first reporting deadlines have been delayed multiple times as the IRS and Treasury refine the form and rules. The current expectation is that brokers will begin filing 1099-DA for tax year 2024 transactions, with filings due in early 2025 or 2026. Customers should expect to receive copies of the forms around the same time they receive traditional 1099 forms from their brokers.

Cost basis tracking challenges

One of the major hurdles is cost basis. A stock broker can easily track the price you paid for a stock and the price you sold it for. But crypto trading is more complex. Many traders:

• Buy crypto on multiple exchanges
• Transfer coins between wallets and exchanges
• Use layer-2 solutions or decentralised protocols not connected to any single broker

A single exchange may not have complete cost-basis data for a customer’s assets. If you bought Bitcoin on Coinbase, moved it to Kraken, sold it, and then bought more on Kraken, Kraken has no record of your original cost basis—only the basis from your purchase on Kraken.

The IRS recognizes this problem. The proposed rules allow brokers to report cost basis only when they have reliable information. If a broker lacks cost-basis data, it may report zero cost basis, leaving the customer to provide the correct basis on their own tax return. This puts the burden partly on traders to maintain meticulous records, especially if they move coins across exchanges.

Self-custody and reporting gaps

A significant loophole remains: self-custody. If you hold crypto in a private wallet that you alone control, no third party has visibility into your transactions. The IRS currently lacks the tools to identify such transactions unless you voluntarily report them.

However, the IRS has shown interest in closing this gap. The proposed rules also target payment processors and platforms that facilitate peer-to-peer crypto transactions. If you sell Bitcoin to a friend via a payment protocol, the processor may eventually be required to report it. The practical scope of such reporting remains unclear, especially for truly peer-to-peer, non-custodial trades that do not pass through a regulated intermediary.

Matching and enforcement

The real power of 1099-DA reporting lies in IRS matching. When a 1099-DA filed by an exchange shows a $100,000 gain and your tax return reports a $50,000 gain, the IRS can automatically generate a notice. The matching algorithm flags discrepancies, and the agency can follow up with audits or assessments.

This marks a substantial shift in enforcement posture. In the pre-1099-DA era, the IRS relied on tip-offs, random audits, and cross-checks of wallet addresses appearing in news reports or law-enforcement cases. Going forward, the IRS will have systematic, year-after-year data on millions of traders, enabling much more efficient identification of under-reported income.

International and decentralised complications

The law’s scope abroad remains ambiguous. A US citizen trading on a foreign exchange (say, Binance’s Singapore entity) may or may not receive a 1099-DA, depending on whether the foreign broker is deemed a “broker” under US law and whether it has registered as such. The IRS has signalled that it will pursue reporting from foreign brokers, but enforcement is patchy.

Decentralised exchanges (DEXes) present an even thornier problem. If you trade tokens on a smart contract-based DEX with no central operator, there is no entity to file a 1099-DA. The transaction is visible on-chain but not reported to the IRS unless you do so yourself. The IRS may eventually use blockchain analysis to identify such transactions, but that technology is still developing.

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