The State of US Digital Asset Enforcement in 2025: A Year in Review

This piece was originally published in April 2025 and updated in December 2025. It captures the regulatory and enforcement landscape as it stood during the 2025 calendar year. Some developments described here have since evolved. For current guidance on reporting your digital assets, see our comprehensive US Digital AssetsTaxation guide.

I'm Chris Herbst, founder of CountDeFi. Every year, I write a snapshot of where things stand with the IRS and digital assets. Not the mechanics of filing, but the bigger picture: what changed, what didn't, and what it means for the people I work with every day.

2025 was the year the IRS moved from talking about enforcement to actually building the infrastructure for it.

Stricter Enforcement from the IRS

The IRS has made it clear: digital assets are a top enforcement priority.

With improved blockchain analytics tools and deepening partnerships with firms like Chainalysis and CipherTrace, the agency is better equipped than ever to identify unreported transactions. In 2025, warning letters continued at scale, and audit activity expanded, especially targeting:

• Unreported proceeds from centralized and decentralized exchange activity
• Undeclared staking and mining income
• Digital asset commerce without proper cost basis tracking

The digital assets question now appears not just on the 1040, but on many more. If you dealt with digital assets in any capacity, you were expected to say so.

Key Developments in 2025

No single piece of legislation transformed the landscape, but several developments shifted the ground:

• Broker Reporting Delays: The controversial broker reporting rules under the Infrastructure Bill were delayed again. Exchanges are lobbying for clearer definitions of who qualifies as a “broker.” Expect this to roll out in 2026, but best to prepare now.
• Form 1099-DA (Digital Asset): While still unofficial, draft versions of the new 1099 for digital assets have been circulated. Some exchanges are already voluntarily issuing transaction summaries. (See our Form 1099-DA guide for a full breakdown.)
• DAOs & Entity Classification: The IRS has hinted at new rules to classify certain DAOs as partnerships or corporations for tax purposes. This could impact liability and reporting obligations.

DeFi and NFTs Still a Grey Zone

Decentralized finance remains a legal and tax grey area.

Lending, staking, liquidity pools, and perpetuals are all taxable, but the exact timing and classification are open to interpretation.

The IRS still hasn’t provided formal guidance on:

• Wrapping and unwrapping tokens
• Layer 2 bridging
• Auto-compounding vaults
• Royalties from NFTs

This leaves users to rely on best practices and conservative interpretations - or risk future audits.

Tax-Loss Harvesting Still a Big Opportunity

For traders and long-term holders alike, tax-loss harvesting remains one of the few tools available to reduce tax liability. Because crypto is currently treated as property (not a security), the wash sale rule does not apply - allowing you to sell at a loss and immediately buy back the same asset.

This is particularly valuable for those holding underperforming NFTs or altcoins. However, there are whispers that Congress could extend the wash sale rule to digital assets. Stay alert.

CountDeFi's Tax-Loss Harvesting Guide is regularly updated and a great resource for tax-strategic traders.

What You Should Be Doing Now

• Track everything. Every trade, yield event, and transfer between wallets. The IRS matching infrastructure arrived in 2025, and retroactive cleanup is always harder than real-time tracking.
• ‍Work with a specialist. Automated tools handle volume, but DeFi complexity, cross-chain activity, and cost basis reconstruction require human judgment. (See our guide on handling missing or inaccurate transaction data.)‍
• Prepare for the 1099-DA era. Even though cost basis reporting was delayed, the gross proceeds data flowing to the IRS created a new matching baseline. If your records don't align with what brokers reported, you'll hear about it.

Looking Ahead

Crypto taxation in the US is only going to get more complex. As regulators catch up with technology, expect greater clarity but also more obligations. Whether you’re investing casually or operating a Web3 business, now is the time to get compliant and optimize your strategy.

Need help with crypto taxes?

Count DeFi specializes in crypto tax reporting, optimization, and audit readiness. Book a call today to get started.