Treasury and IRS Finalize Broker Rule, Delay Decision on DeFi
The US Treasury Department and Internal Revenue Service (IRS) have issued new tax guidelines for cryptocurrency brokers that implement transaction reporting starting in 2025. However, this new regime has since postponed decisions on DeFi activities and unhosted wallet providers. The IRS is still reviewing 44,000 comments made by the public.
IRS’s New Reporting Requirements for Brokers
New IRS rules require cryptocurrency intermediaries such as trading platforms, hosted wallet services and digital asset kiosks to disclose details of customers’ asset movements and earnings.
These rules, which will go into effect on January 1, 2025, aim to integrate crypto brokers with traditional investment firms for filing 1099 forms and cost basis data starting in 2026.
The IRS also announced that the new requirements will include stablecoin transactions and high-value, non-fungible tokens (NFTs), but regular stablecoin sales under $10,000 and NFT earnings under $600 per year will not need to be reported. The aim of this regulation is to increase compliance and reduce tax evasion in high-risk areas of digital assets.
Delayed Decisions on DeFi and Unhosted Wallets
The new rule provides clear guidelines for large centralized exchanges like Coinbase and Kraken, while leaving decisions regarding DeFi activities and unhosted wallet providers until later.
The IRS added that noncustodial industry participants will not be barred from being treated as brokers, but that further analysis is needed. Final rules on these entities are expected to be issued later in the year.
The IRS highlighted the difficulties of controlling non-custodial companies and noted that such firms may not have the necessary customer data and transparency frameworks. This decision provides some relief to the DeFi industry and unhosted wallet providers as more time will be gained for better rules to be established.
IRS Requirements for Stablecoins and NFTs
The IRS has announced that most regular stablecoin transactions will not need to be reported, with certain exceptions for large transactions and transactions generating more than $10,000 in annual revenue.
Stablecoin transactions will be recorded in a grouped manner rather than as specific transactions to appease common cryptocurrency users and also help the IRS track whale activity.
For non-fungible tokens (NFTs), only taxpayers who earn $600 or more per year from NFT sales must declare and report their total income. The IRS will need taxpayer identification information, the number of NFTs sold, and the amount of profits made in these reports. The agency will oversee NFT reporting to ensure it adequately assists in enforcing tax laws.
Industry Concerns and Compliance Burden
The introduction of these tax regulations has been controversial, with significant backlash from the cryptocurrency industry, with concerns raised about the potential for overreach by the U.S. government and the burdensome requirements for entities that do not traditionally function as brokers, such as miners and software developers.
The Blockchain Association and the Digital Chamber had flagged the excessive breadth of information requested and the significant compliance burden. They argue that the proposed rule could require the submission of billions of forms, which would impose significant costs and time constraints on brokers. The IRS estimates the new rule will affect approximately 15 million people and 5,000 companies.
In response, the IRS stated that it aims to balance the need for comprehensive reporting with the industry’s compliance capacity. The agency also noted that any future changes to stablecoin legislation could lead to adjustments to tax rules.
Also Read: Digital Room Flags Privacy Concerns in IRS Digital Asset Tax Draft
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Kelvin is a distinguished writer with a BS in Actuarial Science, specializing in crypto and finance. Known for his sharp analysis and insightful content, he is fluent in English and specializes in thorough research and on-time delivery.
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