What Does the IRS New Crypto Reporting Rule Require?
The US Internal Revenue Service formally implemented mandatory cost basis reporting rules for digital asset brokers on April 15, 2026. The rules apply to centralized exchanges, custodial wallet providers, and certain digital asset processing entities. Under the new requirements, these institutions must submit Form 1099-DA to both the IRS and taxpayers, documenting the sale and exchange of digital assets — including transaction amounts, cost basis figures, and relevant on-chain transaction details.
Why Is the IRS Introducing This Reporting Framework?
The primary objective behind this rule is to close the gap on underreported capital gains from digital assets. Previously, the absence of a standardized reporting mechanism meant that crypto cost basis information was largely self-reported by investors, with limited ability for the IRS to independently verify accuracy. By mandating that brokers submit standardized forms, the IRS is aligning crypto asset tax reporting with the standards already applied to traditional securities such as stocks and bonds, creating an equivalent-level information reporting infrastructure for digital assets.
Which Institutions Are Subject to the New Rules?
The rules explicitly apply to centralized cryptocurrency exchanges, custodial wallet service providers, and certain digital asset processors. It is worth noting that this initial implementation targets centralized intermediaries — decentralized protocols and non-custodial wallet providers are not yet covered under this round of mandatory reporting. However, the prospect of regulatory extension into decentralized infrastructure has already prompted significant industry discussion.
What Do Investors Need to Do Differently?
For crypto investors, the new rules raise the precision bar for tax reporting considerably. Going forward, investors will need to maintain complete and accurate records of the purchase price, acquisition date, and on-chain transaction history for each token holding — data that will need to align with the 1099-DA information submitted by their brokers. Gaps or inaccuracies in cost basis records create direct tax reporting discrepancy risks and may draw IRS scrutiny.
How Should Exchanges Build the Compliance Infrastructure to Meet These Requirements?
Against a backdrop of tightening regulation, exchanges and custodians need to establish more granular transaction data recording and tracking systems — ensuring that every digital asset transaction is fully auditable and reportable. Trustformer KYT provides professional on-chain transaction monitoring and data tracking services, helping centralized exchanges and custodial providers meet IRS reporting requirements while building an end-to-end compliance framework capable of keeping pace with the ongoing escalation of digital asset tax regulation.