New Digital Asset Reporting Rules: DeFi Brokers

This piece was originally published in early 2025 and updated in May 2026. It captures the IRS digital asset reporting regulations landscape for DeFi brokers as it stood at that time. Some developments described here have since evolved. For current guidance, see our comprehensive Form 1099-DA Guide.

The IRS has introduced finalized regulations requiring brokers facilitating digital asset transactions to file information returns and furnish payee statements. These changes aim to improve tax compliance and transparency in the burgeoning digital asset space. Here's an overview of what these regulations mean, who they affect, and how they aim to reshape the industry.

The Infrastructure Investment and Jobs Act, passed in 2021, amended Section 6045 of the Internal Revenue Code to clarify the definition of a "broker" and expand reporting requirements to include all digital assets. Under these amendments, brokers must report gross proceeds from digital asset sales and exchanges on behalf of their customers.

The regulations aim to close the tax gap associated with digital asset transactions by improving compliance and transparency, similar to traditional securities reporting.

Key Highlights of the Regulations

1. Definition of Brokers

The regulations expand the definition of a broker to include individuals and entities in the decentralized finance (DeFi) space who facilitate digital asset transactions, such as:

• Trading platforms
• Hosted wallet providers
• Certain decentralized applications (dApps)
• Aggregators offering execution and settlement services

2. Scope of Digital Assets

Digital assets are defined as cryptographically secured representations of value recorded on distributed ledgers, including cryptocurrencies, NFTs, and other blockchain-based assets.

3. Reporting Requirements

• File Form 1099-B to report gross proceeds from digital asset transactions.
• Furnish payee statements to customers.
• Collect and maintain Know Your Customer (KYC) information.

4. Effective Date for DeFi Brokers

The regulations apply to transactions occurring on or after January 1, 2027.

Implications for Decentralized Finance (DeFi)

These regulations significantly impact the DeFi ecosystem, requiring platforms to collect and report customer information, despite their traditionally non-custodial nature. While this introduces compliance challenges and costs, it also presents opportunities for institutional trust and market maturity.

Public and Industry Feedback

The IRS received over 44,000 comments on the proposed regulations, highlighting concerns about the broad definition of "broker" and seeking exemptions for validators, miners, and developers.

How to Prepare for Compliance

• Understand the Regulations: Familiarize yourself with Form 1099-B reporting and customer data collection requirements.
• Update Systems and Processes: Implement systems to capture necessary transaction data and generate accurate reports.
• Engage Stakeholders: Educate customers and ensure they provide required information.
• Monitor Developments: Stay updated on IRS guidance and changes.

Conclusion

The IRS regulations bring both challenges and opportunities for DeFi brokers. By preparing early, understanding the requirements, and leveraging these changes, brokers can thrive in the evolving digital asset landscape. For the wider picture of how digital assets are taxed in the US, see our comprehensive US Crypto Tax Guide.

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