US Treasury and IRS Set New Tax Reporting Rules for Crypto Brokers
On Friday, the US Treasury Department and the Internal Revenue Service (IRS) concluded the delayed reporting requirements for digital asset brokers providing trading front-end services.
The new regulations apply to all digital asset intermediaries and exchange platforms, including those handling NFTs, except when acting as direct customer agents, dealers, or principals.
Front-End Service Providers Face Strict Rules
The Treasury requires crypto brokers providing trading front-end services to track and report all user activity starting January 1, 2027. All transactions involving US and non-US citizens must be included in reports.
DeFi participants who only provide internet services, browsers, or computer/smartphone manufacturing are excluded from these regulations. The rules specifically target DeFi participants classified as digital asset middlemen.
The Treasury and IRS focus on front-end service providers, treating them as brokers due to their close customer relationships, making them ideally positioned to collect customer identification information.
Taxpayers and the IRS can easily identify these brokers since they are responsible for diligence and reporting, allowing them to adjust operations to comply with the new regulations.
Despite criticism regarding the regulations being burdensome and overly broad, the Treasury and IRS have finalized the rules for implementation on the specified date.