The U.S. Treasury Department and the Internal Revenue Service (IRS) have finalized new regulations that will require cryptocurrency platforms to report their users' transactions to the IRS starting in 2026. This move is part of the Biden Administration's Infrastructure Investment and Jobs Act, which was passed in 2021.

The primary goal of these new regulations is to ensure that gains from the sale of cryptocurrency and other digital assets are accurately reported by both individual investors and the government. Previously, there was no standardized method for reporting these gains. Beginning in 2026, for transactions conducted in 2025, cryptocurrency platforms will be required to provide a standard 1099 form, similar to those used by banks and traditional brokerages. This new requirement aims to simplify the tax filing process for cryptocurrency users.

The IRS has emphasized that these regulations are also intended to combat tax evasion. According to IRS Commissioner Danny Werfel, "We need to make sure digital assets are not used to hide taxable income, and these final regulations will improve detection of noncompliance in the high-risk space of digital assets."

It is important to note that the new regulations apply only to custodial platforms, such as Coinbase and Binance, which take possession of customer assets. Decentralized platforms that do not hold assets will be exempt from these rules. This exemption came after significant lobbying efforts from the crypto industry, with the Blockchain Association, a lobbying group, praising it as "a testament to the incredibly powerful voice of our industry and community."

These regulations are part of a broader effort by the IRS to increase transparency and accountability in the cryptocurrency market. By mandating accurate reporting from platforms, the IRS will have improved oversight of the digital asset market, which could potentially reduce instances of tax evasion by wealthy investors. The introduction of the 1099-DA form is intended to make tax filing more straightforward for cryptocurrency users, providing them with the necessary documentation to comply with tax laws.

While gains from cryptocurrency transactions have always been taxable, the new regulations by the U.S. Treasury and IRS aim to enforce accurate reporting and simplify the tax process for users. This initiative reflects a significant step toward enhancing tax compliance and reducing evasion in the rapidly growing digital asset market.