The New Era of Crypto Taxation in the U.S.
As of January 1, 2025, cryptocurrency transactions across the United States will face new regulatory scrutiny under mandatory third-party reporting requirements. This significant development comes as a result of a report issued by the US Internal Revenue Service (IRS) in June 2024, outlining that centralized crypto exchanges (CEXs) and various brokers are now obligated to report the sales and exchanges of digital assets.
With the introduction of Rev. Proc. 2024-28, the IRS’s new regulations aim to assist crypto investors in filing accurate tax returns related to their digital asset transactions. These guidelines are set to address potential noncompliance issues that could arise within the growing landscape of digital finance.
Why It Matters: A Turning Point for Cryptocurrency Regulation
While the emergence of these tax regulations might appear daunting to some, industry analysts suggest that they signify a crucial turning point for the cryptocurrency sector. Rob Massey, Deloitte’s global tax leader for blockchain and digital assets, notes that with nearly two decades of existence, digital assets finally have comprehensive regulatory guidance. “It’s time to pay attention to crypto and taxes,” he emphasized, adding that while the rules may introduce complexities, the mere existence of clear guidance is a monumental step forward.
Insights from Industry Experts
Experts have been advocating for clearer messaging from the IRS regarding crypto for several years. Shehan Chandrasekera, head of tax strategy at Cointracker.com, expressed relief at the arrival of these rules, emphasizing their thoughtful development based on extensive stakeholder feedback. “I’m glad it’s finally here,” he remarked. “It’s reassuring to see that the IRS took the time to carefully review thousands of comments from various stakeholders and develop thoughtful, well-considered guidance.”
Navigating Crypto Tax Rules in 2025
According to Jonathan Bander, managing partner and head of tax strategy at Experity CPA, the IRS’s new rules indicate a significant shift in how cryptocurrencies are integrated into the broader financial system. He cautioned, however, that understanding these details requires a considerable level of preparation. “Crypto investors must now report all transactions — whether your crypto is on an exchange or in a self-custody wallet,” Bander explained. He also clarified that capital gains or losses must be reported, irrespective of the storage method.
Key Features of the New Guidelines
Bander highlighted that transferring cryptocurrencies between wallets or exchanges is not a taxable event, but maintaining meticulous records is crucial. Additionally, centralized exchanges will issue new 1099-DA forms, designed to facilitate consistent reporting for taxpayers and the IRS alike.
The new IRS guidelines notably simplify the overall taxation process for crypto holders and acknowledge the rising importance of decentralized finance (DeFi). For instance, the updated rules validate the use of self-custody wallets in tax reporting. “It’s a huge step forward,” Massey stated. “The US Treasury is recognizing that crypto holders practice self-custody, which we had no formal recognition of before.”
Moreover, the introduction of specific identification (Spec ID) provides investors with the ability to accurately calculate their capital gains. Bander explained that with Spec ID, investors now have the option to choose which cryptocurrency they wish to sell based on its purchase price. “This is crucial, especially in scenarios where all Bitcoin is held in one wallet,” he added, explaining that previously, brokers defaulted to the FIFO (First In, First Out) method if no accounting method was chosen. “Spec ID is now available to all crypto investors, but they must get it right,” Massey cautioned.
What Lies Ahead: Future Regulatory Developments
As 2025 approaches, many are left wondering whether further tax rules may emerge. Bander anticipates that clarity around DeFi income—including aspects such as lending, staking, and liquidity pools—will be necessary moving forward. Moreover, guidelines concerning non-fungible tokens (NFTs) are likely to be developed. “It’s also essential to clarify wash sale rules that, to date, have not applied to digital assets,” he said.
Voices of Concern: Industry Pushback
Despite the enthusiasm surrounding these new crypto tax guidelines, some experts express apprehension regarding their implications. Notably, the Blockchain Association filed a lawsuit against the IRS in December 2024, arguing that the broadened definition of “broker” infringes on individual privacy rights and may inadvertently drive innovation offshore. Marisa Coppel, head of legal for the Blockchain Association, criticized the rules for expanding the definition of broker to include providers of DeFi trading front-ends, which do not execute transactions themselves. “This not only infringes on the privacy rights of individuals but also threatens the future of this burgeoning technology,” Coppel cautioned.
Conclusion: Embracing Compliance in a New Landscape
Despite these concerns, experts like Massey have noted a surge in clients seeking compliance assistance since the introduction of the new guidelines. “We are seeing crypto investors eager to catch up and comply with regulations,” he stated, reflecting a broader trend of traditional investors entering the crypto sphere. The landscape may be shifting, but one thing is clear: as digital assets continue to intertwine with conventional finance, the call for clarity and compliance is stronger than ever.