DeFi Broker Tax Rules: Form 1099-DA Reporting in 2026

By Chanté Eliaszadeh

The IRS digital asset broker reporting regime is now operational. Custodial crypto platforms have already furnished their first Forms 1099-DA to customers and filed them with the IRS this past winter, reporting gross proceeds for sales that occurred in 2025. The Treasury Department and IRS finalized these requirements in Treasury Decision 10000, issued July 9, 2024, which requires certain crypto platforms to file Form 1099-DA and report customer transactions for sales effected on or after January 1, 2025.¹

The controversial companion rule that would have extended reporting to decentralized-finance front-end providers did not survive. Congress used the Congressional Review Act to nullify it, and President Trump signed the disapproval resolution into law in April 2025.² Treasury and the IRS then formally removed that rule from the Code of Federal Regulations in July 2025, completing the repeal.³ The core custodial broker regulations, however, remain fully in effect. Centralized exchanges, hosted wallet providers, payment processors, and digital asset kiosks are now subject to comprehensive reporting obligations, backed by penalties that can reach into the millions of dollars annually, with separate exposure for failing to file with the IRS and failing to furnish statements to customers.

This guide explains who must comply, what information must be reported, the technical challenges platforms face, and the steps brokers should take now that they are operating under the rules and preparing for full basis reporting in the 2026 tax year. For broader crypto tax fundamentals and IRS reporting obligations, see our Crypto Tax Lawyer’s Guide. For the policy context around FinCEN’s adjacent crypto ATM enforcement, see FinCEN’s CVC Kiosk Crackdown.

Background: Infrastructure Act Mandate

The reporting requirements stem from Section 80603 of the Infrastructure Investment and Jobs Act, which amended Internal Revenue Code Section 6045 to explicitly include digital assets within broker reporting obligations.⁴ The statute defined “digital assets” as “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology” and expanded the definition of “broker” to encompass entities facilitating digital asset transactions.

Congress mandated these changes to address the tax gap in cryptocurrency transactions. When it scored the Act’s broker-reporting provision, the Joint Committee on Taxation estimated that the expanded information reporting on digital assets added by the Infrastructure Investment and Jobs Act would raise roughly $28 billion in revenue over 10 years by improving voluntary compliance and IRS enforcement capabilities.⁵

The IRS published proposed regulations on August 29, 2023, received over 44,000 public comments (many opposing DeFi platform reporting), and issued the final custodial regulations on July 9, 2024.⁶

Who Is a “Broker” Under the Rules?

The final regulations impose reporting obligations on custodial brokers---entities that have custody or control over customers’ digital assets and can verify customer identities.

Entities Subject to Reporting Requirements

1. Custodial Digital Asset Trading Platforms (Centralized Exchanges)

Platforms that custody digital assets on behalf of customers and facilitate buying, selling, or exchanging digital assets qualify as brokers. This includes the major U.S. centralized exchanges:

• Coinbase, Kraken, Gemini, Bitstamp
• Binance.US and similar custodial exchanges
• Any platform where users deposit assets into platform-controlled wallets

2. Hosted Wallet Providers

Services that control private keys on behalf of users and can initiate transactions must report if they facilitate sales or exchanges:

• PayPal, Venmo (crypto features)
• Cash App (Block)
• Robinhood Crypto
• Any “custodial wallet” service

3. Digital Asset Payment Processors

Processors that settle transactions in digital assets and have the capacity to verify buyer and seller identities:

• BitPay (if custodial)
• Coinbase Commerce
• Payment processors converting crypto to fiat for merchants

4. Digital Asset Kiosks (Bitcoin ATMs)

Physical kiosks facilitating digital asset purchases or sales where the operator maintains custody during transactions:

• Bitcoin Depot, Coinme, and other kiosk operators
• Two-way ATMs enabling both purchases and sales

Stablecoin issuers navigating these rules alongside GENIUS Act compliance should review our GENIUS Act Stablecoin Compliance Roadmap.

5. Certain Stablecoin Issuers

Issuers who regularly redeem their stablecoins for fiat currency may qualify as brokers for redemption transactions:

• USDC redemptions (Circle)
• USDT redemptions (Tether, if facilitating direct redemptions)
• Other fiat-backed stablecoin issuers offering redemption services

Who Is NOT a Broker: Important Exemptions

The regulations explicitly exclude entities that do not have custody or cannot verify customer identities:

Non-Custodial Protocols and Smart Contracts:

• Decentralized exchange protocols (Uniswap, SushiSwap, Curve)
• Automated market makers (AMMs) operating autonomously on-chain
• Decentralized lending protocols (Aave, Compound)
• Smart contracts with no custodial control

Non-Custodial Wallet Providers:

• MetaMask, Trust Wallet, Ledger Live (software only)
• Hardware wallet manufacturers
• Self-custody solutions where users control private keys

Blockchain Miners and Validators:

• Bitcoin miners processing transactions
• Ethereum validators
• Block producers on other networks

Software Developers:

• Protocol developers who create but do not operate platforms
• Open-source contributors to DeFi protocols

The final custodial regulations do not treat operators of decentralized digital protocols or developers of protocol software as brokers; the separate front-end rule that would have reached certain interface providers has since been repealed, as discussed below.

Form 1099-DA Requirements

Brokers report on Form 1099-DA, “Digital Asset Proceeds From Broker Transactions,” to capture qualifying sales and exchanges.

Phased Implementation: Where Reporting Stands Now

2025 Tax Year (Forms Furnished and Filed in Early 2026):

For the first reporting cycle, now complete, brokers reported gross proceeds only for sales of digital assets that occurred on or after January 1, 2025:

• Box 1e (Date Sold): Date of sale or exchange
• Box 1f (Proceeds): Total proceeds from sale, reduced by transaction costs paid to the broker
• Boxes 1a—1c: Digital asset identifier, name, and number of units sold

Basis reporting was voluntary for the 2025 tax year---brokers could report cost basis information if available, but were not required to do so. Most brokers did not report basis for 2025 transactions, given implementation challenges and the gross-proceeds-only scope of that first cycle.

2026 Tax Year (Forms To Be Issued in Early 2027):

The 2026 tax year is the first year of full basis reporting. For sales of “covered securities,” brokers must report both gross proceeds and adjusted basis:

• Box 1d (Date Acquired): When the customer acquired the digital asset
• Box 1g (Basis): Customer’s cost basis in the asset
• Box 2 (Basis Reported to IRS): Indicates basis is being reported to the IRS
• Box 6 (Gain or Loss): Calculated gain or loss, categorized as short-term or long-term

Because the covered-securities trigger is acquisition on or after January 1, 2026 through the same broker that effects the sale, the systems brokers built for the 2025 cycle are now being extended to capture acquisition dates and cost basis for the 2026 transactions that will be reported next year.

Covered Securities vs. Noncovered Securities

Covered Securities: Digital assets acquired on or after January 1, 2026 through the same broker effectuating the sale. Brokers must report basis.

Noncovered Securities: Assets acquired before January 1, 2026, acquired through a different broker, or transferred from self-custody. Basis reporting is voluntary for these assets, and brokers checking Box 9 are protected from penalties if basis information is incorrect.

Form 1099-DA Technical Specifications

Filing Deadlines:

• To IRS: February 28 (paper) or March 31 (electronic) following the calendar year
• To Customers: January 31 following the calendar year
• Electronic filing is mandatory for filers required to submit 10 or more aggregate information returns in a calendar year

DeFi Protocol Exemptions and the Congressional Repeal

The DeFi Front-End Rule

Treasury and the IRS initially attempted to extend broker reporting requirements to “front-end service providers” for DeFi protocols---entities that provide user interfaces for interacting with decentralized protocols, even if they do not custody assets.

In late December 2024, Treasury released a separate final rule, TD 10021, that would have required DeFi front-end operators to:⁷

• Collect know-your-customer (KYC) information from users
• Track blockchain transactions conducted through their interfaces
• File Form 1099-DA reporting on users’ decentralized trading activity
• Comply beginning with transactions on or after January 1, 2027

Congressional Review Act Repeal

The crypto industry and privacy advocates mounted fierce opposition to the DeFi front-end rule, arguing it was technologically unworkable and would push development overseas. Congress responded under the Congressional Review Act. The House passed H.J. Res. 25 on March 11, 2025, by a vote of 292 to 132; the Senate passed it on March 26, 2025, by a vote of 70 to 28; and President Trump signed it into law on April 10, 2025, as Public Law 119-5.⁸ Treasury and the IRS then formally struck TD 10021 from the Code of Federal Regulations through a final rule published July 11, 2025, completing the repeal.⁹

A central feature of the Congressional Review Act is that once Congress disapproves a rule, the agency may not reissue it in “substantially the same form” without new authorizing legislation.¹⁰ That bar is what distinguishes the front-end rule’s fate from the custodial regulations.

Effect of the Repeal:

• DeFi front-end service providers are not subject to Form 1099-DA reporting
• Protocols operating without custodial control remain exempt
• The IRS is barred from reissuing a substantially similar rule absent new legislation
• The repeal stands as a meaningful obstacle to future DeFi reporting mandates by regulation

Why the Custodial Rule Survived and the Front-End Rule Did Not

The two rules met different fates because of Congressional Review Act timing. The custodial regulations, TD 10000, were finalized in July 2024; the window during which Congress could disapprove them under the Act had already closed by the time H.J. Res. 25 moved. The front-end rule, TD 10021, was finalized at the very end of December 2024; its disapproval window was still open in the new Congress, and the resolution reached it in time. The result is a clean custodial-versus-non-custodial bright line.

Must Report (Custodial):

• Centralized exchanges with custody (Coinbase, Kraken)
• Hosted wallets controlling private keys (PayPal, Cash App)
• Payment processors with custodial features
• Bitcoin ATMs with custody during transactions

Need Not Report (Non-Custodial):

• Pure DeFi protocols (Uniswap, Aave, Compound)
• Front-end interfaces to DeFi protocols (app.uniswap.org)
• Non-custodial wallet software (MetaMask)
• Self-custody solutions

Gray Area Requiring Analysis:

• Hybrid models with limited custody
• Protocols with multisig governance controls
• Cross-chain bridges with temporary custody
• Staking-as-a-service providers

Operating Under the Rules: A Present-Tense Compliance Map

With the first reporting cycle behind them, brokers are no longer racing toward a launch date---they are running a live reporting operation and extending it to capture basis for the 2026 tax year. The work breaks down into the following areas.

Confirm and Document Broker Status

Every platform handling digital assets should have a current, documented determination of whether it is a custodial broker:

• Determine whether the platform has custody or control over customer assets and can verify customer identity
• Document the custody model and transaction flows that support the determination
• Identify any exemptions that apply and memorialize the analysis in a legal memorandum
• Revisit the determination when the product changes---added custody features, new staking or bridging services, or governance changes can move a platform across the line

Run the Data and Systems That Are Now Live

Custodial brokers should be capturing reportable data in real time rather than reconstructing it at year-end:

• Capture date sold, proceeds, and units sold for every disposition as it occurs
• For the 2026 tax year, capture acquisition dates and cost basis for covered securities so that next year’s Forms 1099-DA can report basis accurately
• Reconcile transaction feeds against the tax-reporting system to confirm completeness
• Monitor data quality continuously, not only at filing season

Maintain the Reporting Technology Stack

Whether a broker built in-house or licensed a vendor solution, the system now needs upkeep:

• Keep crypto tax-reporting software current with IRS format changes (vendors in this space include CoinTracker, TaxBit, Lukka, and CryptoWorth)
• Extend the 2025 gross-proceeds configuration to populate the basis and gain/loss fields required for covered securities
• Maintain validation rules that catch data errors before forms are generated
• Confirm the system produces files in the format the IRS electronic-filing platform accepts

Sustain Customer Data Collection and Backup Withholding

Identity and tax-status data collection is an ongoing operation, not a one-time onboarding task:

• Collect Form W-9 from U.S. customers and Form W-8 from non-U.S. customers, and keep TIN records current
• Maintain backup-withholding procedures for customers who fail to provide a valid TIN
• Track the transition relief described below, which currently relieves brokers from backup withholding on digital asset sales through 2026, with modified relief for 2027

Communicate With Customers

Customers received their first Forms 1099-DA this past winter, and brokers should keep their explanatory materials current:

• Maintain website explanations and FAQs describing what Form 1099-DA reports and what it does not
• Tell customers that 2026 forms will report basis for covered securities and what that means for their own returns
• Provide a clear process for customers to flag and correct errors, and issue corrected forms promptly

Prepare Specifically for 2026 Basis Reporting

The single most consequential change this year is the move from gross-proceeds-only to full basis reporting for covered securities:

• Confirm that systems reliably capture acquisition date and cost basis for assets acquired through the broker on or after January 1, 2026
• Apply a consistent, documented methodology for transferred-in assets, which generally fall outside covered-security status
• Where the Rev. Proc. 2024-28 wallet-by-wallet basis-allocation safe harbor was used for units held as of January 1, 2025, keep the allocation records that support it
• Test gain/loss calculations and short-term versus long-term categorization before the 2027 filing season

Technical Challenges and Solutions

Form 1099-DA reporting presents real technical challenges, particularly for platforms that historically prioritized user privacy or did not track acquisition data.

Challenge 1: Identifying Digital Assets with Token Identifiers

Problem: Box 1a of Form 1099-DA calls for the asset’s Digital Token Identifier Foundation (DTIF) code---a 9-character alphanumeric identifier under the ISO 24165 standard referenced in the IRS instructions. Not every digital asset has an assigned DTIF code, so brokers can diverge in how they identify the same asset when no code exists.

Solution: Many platforms standardize on:

• The DTIF code (ISO 24165) where one has been assigned to the asset
• Widely used market-data identifiers (CoinMarketCap or CoinGecko IDs) as a fallback
• Ticker symbols with disambiguation
• Contract addresses for tokens issued on smart-contract platforms

Because not every asset carries an assigned DTIF code, there is residual risk of customer confusion if different brokers identify the same asset differently.

Challenge 2: Tracking Cost Basis for Transferred Assets

Problem: When customers transfer digital assets in from self-custody wallets or other platforms, the receiving broker has no inherent way to determine acquisition date or cost basis. For covered securities, brokers must report basis, but transfers break the chain of custody.

Solution: Brokers are implementing several approaches:

Approach A: Treat Transfers-In as Noncovered Securities

• Mark transferred-in assets as noncovered (Box 9 checked)
• Report basis voluntarily only if the customer provides reliable documentation
• Preserve the penalty protection that attaches to noncovered-security treatment

Approach B: Request Customer Basis Information

• Collect basis documentation from customers at the time of transfer
• Verify the information against blockchain records where possible
• Use customer-provided basis but mark the asset as noncovered

Approach C: Document a Conservative Default

• For transferred-in assets where reliable basis is unavailable, apply and disclose a consistent default methodology
• Disclose the method to the customer so they can supplement or correct it on their own return

The IRS has indicated it will provide further guidance on basis determination for transferred assets, including the possibility of transfer statements between brokers.

Challenge 3: Identifying Wash Sales Across Wallets

Problem: Wash sale rules disallow losses when substantially identical securities are purchased within 30 days before or after a sale. Customers may trigger wash sales by trading the same digital asset across multiple platforms or in self-custody wallets, which an individual broker cannot detect.

Solution: Most brokers take a conservative, platform-bounded approach:

• Track wash sales only within the broker’s own platform
• Do not attempt to identify wash sales occurring on other platforms or in self-custody
• Clearly disclose the limitation to customers
• Recommend that customers consult their own tax professionals

The IRS may eventually address cross-platform wash sale coordination, but has not mandated it among brokers.

Challenge 4: Calculating Proceeds for Complex Transactions

Problem: Many digital asset transactions do not fit traditional securities models:

• Crypto-to-crypto swaps: Exchanging one token for another is a taxable event, but determining proceeds requires valuing the received asset
• Liquidity pool transactions: Adding liquidity creates new LP tokens; withdrawing involves complex calculations
• Staking rewards: Timing and valuation questions complicate reporting
• Forks and airdrops: New assets received with uncertain basis

Solution: The IRS issued Notice 2024-57, providing temporary exceptions from reporting for certain complex transactions:¹¹

Exempt Transactions (No Form 1099-DA Required Until Further Guidance):

1. Wrapping and unwrapping transactions (e.g., WETH and ETH)
2. Liquidity provider transactions (adding or removing liquidity from pools)
3. Staking transactions (depositing or withdrawing staked assets)
4. Certain digital asset lending transactions
5. Short sales of digital assets
6. Notional principal contracts (derivatives settled in crypto)

Brokers should still track these transactions internally but need not report them on Form 1099-DA until the IRS issues clarifying guidance.

Challenge 5: Complying with State Reporting Requirements

Problem: States have varying requirements for information returns. Some conform to federal tax treatment of digital assets; others do not.

Solution:

California: Participates in the IRS Combined Federal/State Filing (CF/SF) Program, allowing brokers to file federal and state returns simultaneously. California treats cryptocurrency as property subject to state income tax.

New York: Does not participate in the CF/SF program and does not require separate state 1099 filing. New York nonetheless taxes cryptocurrency as property, and brokers should expect customers to owe state tax on gains.

Other States: Many states conform to federal reporting rules; brokers should confirm state-specific requirements and monitor legislative developments.

Practical Approach:

• Anchor on federal Form 1099-DA compliance first
• Use the form’s state-reporting fields for California and other participating states
• Monitor state legislative developments for new requirements

Penalties for Non-Compliance

Brokers face substantial penalties for failure to comply with reporting requirements. The per-form figures below apply to 2025 information returns (those filed in 2026) and are adjusted annually for inflation.¹²

Failure to File Correct Information Returns (IRC § 6721)

Brokers who fail to file Form 1099-DA with the IRS, or who file forms with incorrect information, face tiered penalties:

The annual maximum for failure-to-file penalties under Section 6721 is adjusted yearly for inflation. For large filers---those with average annual gross receipts over $5 million---it exceeds $4 million, with substantially lower caps for small businesses.

Example: A mid-size exchange with 50,000 customers that failed to file Forms 1099-DA at all would face a per-form exposure of $17 million ($340 × 50,000), subject to the annual inflation-adjusted cap.

Failure to Furnish Correct Payee Statements (IRC § 6722)

Separate penalties apply for failing to furnish Forms 1099-DA to customers, at the same per-form tiers:

The Section 6722 penalty applies separately from and stacks on top of the Section 6721 penalty, and it carries its own annual inflation-adjusted cap. A broker that both fails to file with the IRS and fails to furnish statements to customers faces exposure under both provisions.

Intentional Disregard

If the IRS determines that a broker intentionally disregarded a filing requirement, the penalty increases sharply:

• Per-form penalty: the greater of $680 or 10% of the aggregate amount required to be reported, with no annual cap
• Potential criminal exposure under IRC § 7203 (willful failure to file)

Additional Enforcement Mechanisms

Backup Withholding (24%): As a general matter, when a broker cannot obtain a valid customer TIN, the broker must withhold 24% of gross proceeds and remit it to the IRS. Current transition relief, discussed below, suspends this obligation for digital asset sales through the 2026 tax year, with modified relief for 2027.

IRS Examinations: Non-compliance increases the likelihood of an IRS examination, which can surface other tax issues.

Reputational Risk: Public disclosure of non-compliance can damage customer trust and create competitive disadvantages.

Transition Relief

The IRS recognized the difficulty of standing up new reporting systems and issued a series of transition-relief measures.

Notice 2024-56: Good-Faith Penalty and Backup-Withholding Relief

For Forms 1099-DA reporting transactions occurring in calendar year 2025 (filed in 2026), the IRS provided that it would not impose penalties under IRC Sections 6721 or 6722 where the broker made a good-faith effort to file accurately and timely.¹³ The notice also provided initial backup-withholding transition relief for the 2025 cycle.

What “Good Faith” Means:

The IRS has not defined the term with precision, but practitioners read it to include:

• Implementing reasonable systems to capture required data
• Filing forms even where some fields are incomplete or estimated
• Correcting errors promptly when discovered
• Cooperating with IRS inquiries and documenting compliance efforts

Notice 2025-33: Extended Backup-Withholding Relief

The IRS extended the backup-withholding transition relief in Notice 2025-33.¹⁴ Under the notice, no backup withholding is required on digital asset sales in 2025 or 2026. For 2027, the relief is limited and modified---for example, the notice addresses applying the 24% rate to gross proceeds from certain crypto-for-crypto sales, and provides TIN-matching and exempt-foreign-person relief that extends into 2027. This is the current state of backup-withholding relief for digital asset brokers, and it should anchor a broker’s withholding planning for the next two reporting cycles.

Notice 2024-57: Temporary Exceptions for Complex Transactions

As described above, the IRS exempted six categories of complex transactions from reporting until further guidance issues. Brokers who do not report these transactions will not face penalties for that omission, even if the IRS later determines reporting was required.

Rev. Proc. 2024-28: Wallet-by-Wallet Basis Safe Harbor

Rev. Proc. 2024-28 provides a safe harbor for allocating unused basis among digital assets on a wallet-by-wallet (account-by-account) basis for units held as of January 1, 2025.¹⁵ Brokers and customers relying on the safe harbor should retain the records supporting their allocations, which remain relevant as covered-security basis reporting begins for the 2026 tax year.

Voluntary Basis Reporting Protection

For noncovered securities---assets acquired before January 1, 2026, or transferred from another broker or wallet---brokers who voluntarily report basis are protected from penalties if the basis turns out to be incorrect, provided they:

• Check Box 9 indicating the asset is a noncovered security
• Make a reasonable effort to determine correct basis
• Rely on customer-provided information or publicly available data

State Tax Implications and Conformity

Although Form 1099-DA is a federal form, state tax authorities use the information for state income tax enforcement.

States That Conform to Federal Digital Asset Treatment

Most states treat cryptocurrency as property for income tax purposes, following the federal framework. States such as California, New York, Illinois, Massachusetts, and Georgia apply federal gain/loss calculations and will use Form 1099-DA data in state income tax administration.

States with No Income Tax

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming impose no broad-based individual income tax, which removes state income-tax reporting concerns for brokers with respect to residents of those states.

Practical State Compliance Strategy

For Brokers:

1. Anchor on federal compliance: State requirements generally follow federal Form 1099-DA
2. Use Combined Federal/State Filing where available, including for California
3. Monitor state legislation for special cryptocurrency taxes or reporting
4. Document customer state residency for nexus determination
5. Consult state tax counsel in states with unique rules

For Customers:

Brokers should help customers understand that:

• Form 1099-DA proceeds will be reported to state tax authorities in most states
• Customers remain responsible for calculating their own state income tax liability
• State tax rates vary, and some states may not conform to all federal digital asset tax rules

International Coordination

The United States is not alone in implementing crypto tax reporting, and brokers with cross-border operations should plan for overlapping regimes.

• OECD Crypto-Asset Reporting Framework (CARF): Establishes automatic exchange of tax information on crypto assets among participating jurisdictions, conceptually similar to the framework used for traditional financial accounts
• EU DAC8: Directive (EU) 2023/2226 requires crypto-asset service providers to report customer transactions to EU tax authorities; it applies from January 1, 2026, with the first information exchange in 2027
• Convergence on standards: Reporting formats and digital asset identifiers are likely to converge over time across jurisdictions

U.S. brokers with international operations should anticipate coordinating compliance across multiple jurisdictions.

What Comes Next

The first reporting cycle is complete, and the regime is now in steady operation. The areas to watch are the ones where the IRS has signaled further guidance and where the line between covered and noncovered assets remains operationally hard.

Expected IRS Guidance

The IRS has indicated it will address:

• Standardized digital asset identifiers to ensure consistency across brokers
• Basis tracking for transferred assets, including potential transfer statements between brokers
• Wash sale coordination across platforms
• Complex transaction reporting for the categories currently exempt under Notice 2024-57
• Foreign broker reporting and cross-border information exchange

Potential Legislative Developments

Congress may revisit digital asset taxation as implementation reveals gaps or friction:

• De minimis exemption: Proposals would exempt small transactions from reporting to reduce compliance burden
• Crypto-to-crypto swap treatment: Periodically proposed but not enacted
• DeFi reporting: Any attempt to reimpose front-end reporting by regulation faces the Congressional Review Act bar; a renewed mandate would, as a practical matter, require new legislation

Enforcement Priorities

With reporting operational, brokers should expect the IRS to:

• Match Forms 1099-DA against individual returns and issue automated notices for underreported income
• Examine brokers to verify reporting accuracy and completeness
• Target high-dollar noncompliance with audits and enforcement actions
• Pursue criminal cases for willful evasion in egregious scenarios

The Bottom Line

Digital asset broker reporting is no longer a future obligation---it is the current operating environment. Custodial platforms have completed their first Form 1099-DA cycle and are now extending their systems to report basis for covered securities in the 2026 tax year. The DeFi front-end rule has been repealed and cannot be reinstated by regulation in substantially the same form. The practical agenda for the rest of 2026 is concrete: confirm and document broker status, run the live reporting systems with discipline, extend basis tracking to covered securities, keep backup-withholding planning aligned with Notice 2025-33, and maintain clear customer communications.

If your platform maintains custody of customer digital assets and facilitates sales or exchanges, this is the moment to confirm that your reporting program is not merely operational but defensible. The cost of disciplined compliance is manageable; the cost of getting it wrong---per-form penalties under two separate Code sections, plus examination and reputational exposure---is not.

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Disclaimer: This article provides general information for educational purposes only and does not constitute legal or tax advice. Digital asset tax regulation continues to evolve. Consult qualified legal counsel and tax professionals for advice on your specific situation.

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Footnotes

1. Treasury Decision 10000, 89 Fed. Reg. 56480 (July 9, 2024), https://www.federalregister.gov/documents/2024/07/09/2024-14004/gross-proceeds-and-basis-reporting-by-brokers-and-determination-of-amount-realized-and-basis-for ↩

2. An Act providing for congressional disapproval of the IRS DeFi broker rule, Pub. L. No. 119-5 (Apr. 10, 2025) (disapproving the rule under 5 U.S.C. ch. 8); see H.J. Res. 25, 119th Cong. (2025), https://www.congress.gov/bill/119th-congress/house-joint-resolution/25 ↩

3. Removal of Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales, 90 Fed. Reg. 30825 (July 11, 2025) (docket 2025-12967), https://www.federalregister.gov/documents/2025/07/11/2025-12967 ↩

4. Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, § 80603, 135 Stat. 429, 1339—40 (2021) ↩

5. Joint Committee on Taxation, Estimated Budget Effects of the Revenue Provisions Contained in the Infrastructure Investment and Jobs Act, JCX-33-21 (Aug. 2, 2021) (broker information-reporting provision, IRC §§ 6045 and 6045A as amended) ↩

6. Gross Proceeds and Basis Reporting by Brokers (proposed rule), 88 Fed. Reg. 59576 (Aug. 29, 2023); final regulations issued July 9, 2024, see note 1 ↩

7. Treasury Decision 10021, 89 Fed. Reg. 106928 (Dec. 30, 2024) (Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales), https://www.federalregister.gov/documents/2024/12/30/2024-30496 ↩

8. H.J. Res. 25, 119th Cong. (2025) (passed House Mar. 11, 2025, 292—132; passed Senate Mar. 26, 2025, 70—28; signed Apr. 10, 2025, as Pub. L. No. 119-5), https://www.congress.gov/bill/119th-congress/house-joint-resolution/25 ↩

9. Removal of Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales, 90 Fed. Reg. 30825 (July 11, 2025), https://www.federalregister.gov/documents/2025/07/11/2025-12967 ↩

10. 5 U.S.C. § 801(b)(2) ↩

11. IRS Notice 2024-57, Reporting and Penalty Relief for Brokers for Certain Digital Asset Transactions Under Section 6045, https://www.irs.gov/pub/irs-drop/n-24-57.pdf ↩

12. Rev. Proc. 2024-40, 2024-45 I.R.B. (inflation-adjusted information-return penalty amounts under IRC §§ 6721 and 6722 for returns required to be filed in 2026) ↩

13. IRS Notice 2024-56, 2024-29 I.R.B. 64 (July 15, 2024), https://www.irs.gov/pub/irs-drop/n-24-56.pdf ↩

14. IRS Notice 2025-33 (extending backup-withholding transition relief for digital asset sales through 2026, with limited and modified relief for 2027), https://www.irs.gov/pub/irs-drop/n-25-33.pdf ↩

15. Rev. Proc. 2024-28, 2024-31 I.R.B. 233 (safe harbor for allocating basis among digital assets held within a wallet or account as of January 1, 2025) ↩