Topline

The Treasury Department has announced a new reporting requirement for most crypto brokers that will require them to disclose the proceeds of users’ transactions to the Internal Revenue Service (IRS) starting in 2026. This move is aimed at curbing tax evasion through the cryptocurrency market.

The rule, which will go into effect in two years, will mandate crypto exchanges and payment processors like Coinbase to report information on user sales and trades to the IRS. The IRS clarified that this rule is not a new tax, as cryptocurrency investors have always been required to pay taxes when selling their assets. The new rules are said to be similar to those already applied to traditional financial services.

This reporting requirement is seen as a way to prevent tax evasion on crypto platforms, where transactions can be linked to public addresses that are difficult to connect with specific traders. Additionally, crypto traders will now receive simple tax reporting forms each year, similar to investors in stocks and other traditional assets. This will replace the need for expensive and often inaccurate service providers that traders have historically relied on to estimate their taxes owed.

There are exceptions to the rule, with decentralized exchanges being excluded from having to report user transactions. However, the Treasury Department has indicated that it may consider more reporting requirements for decentralized crypto exchanges in the future.

The reporting requirement is estimated to generate $28 billion in tax revenues for the federal government, according to Deloitte. Federal regulators have been seeking to regulate cryptocurrency firms for about a decade, with recent actions from the Securities and Exchange Commission targeting large crypto companies like Binance, Coinbase, and FTX.

Overall, this new reporting requirement marks a significant step in regulating the cryptocurrency market and ensuring tax compliance among investors.