New IRS Rule Against Tax Evasion Requires Crypto Companies to Reveal Trade Information

The U.S. Treasury Department has announced a new requirement for most crypto brokers to report user transaction proceeds to the Internal Revenue Service (IRS) starting in two years. The measure, aimed at preventing tax evasion in the cryptocurrency market, was revealed through an IRS statement on June 28, 2024.

Beginning in 2026, payment processors and crypto exchanges, including platforms such as Coinbase, will be mandated to share information on user trades and sales with the IRS. This includes, in certain cases, stablecoins such as Circle’s USDC and Ether (USDT), as well as high-value NFTs. However, the IRS remains undecided on whether tokens should be classified as commodities or securities.

The IRS clarified that this is not a new tax but a reinforcement of the existing obligation for crypto investors to pay taxes on asset sales. According to the agency, the new rules align with those already applicable to mainstream financial services.

The regulation is being promoted as a deterrent against tax evasion on cryptocurrency platforms, which often facilitate this crime due to the difficulty of linking public transaction addresses to specific individuals. The change will also simplify tax reporting for crypto traders, allowing them to receive straightforward tax forms annually, similar to those for stocks and other conventional asset investors. In the past, cryptocurrency investors have depended on expensive and often unreliable services to estimate their taxes.

Notably, the new rule exempts certain platforms, such as decentralized exchanges, which focus on peer-to-peer trading without middlemen, from reporting user transactions. Nonetheless, the statement notes that the U.S. Treasury Department has plans to explore additional reporting requirements for decentralized cryptocurrency exchanges this year.

The federal government is expected to raise $28 billion in tax revenue from the adoption of the reporting rule, according to a Deloitte analysis.

U.S. financial regulators have been attempting to oversee crypto platforms for nearly a decade. In recent years, the U.S. Securities and Exchange Commission (SEC) has pursued legal actions, penalties and charges against major crypto companies, including FTX, Binance and Coinbase.

Although the IRS has mandated that cryptocurrency investors disclose their transactions on tax returns, it has not yet established a thorough regulatory structure, in contrast to the recently enacted tax reporting rule. Instead, most tax authorities worldwide, including the IRS, have had to rely on subpoenas to identify significant transactions, a challenge compounded by the cryptocurrency market’s constant evolution.

Other crypto industry players, such as BitFuFu Inc. (NASDAQ: FUFU), could be bracing for additional reporting requirements from the IRS that could apply to the industry segment in which they operate.

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