For those involved in buying and selling crypto assets like Bitcoin (BTC), a significant change is on the horizon for the 2025 tax year. Notably, transactions conducted on centralized exchanges (CEXs) will be subject to new third-party reporting requirements, a move set to enhance transparency in the cryptocurrency market.
IRS To Mandate Reporting For Crypto Transactions On Custodial Platforms
According to CNN, this development means that if you trade crypto assets on custodial platforms such as Coinbase or Gemini, the information regarding your transactions will be reported directly to the Internal Revenue Service (IRS).
This marks a critical shift in how cryptocurrency transactions are tracked and reported, as it aims to simplify compliance for taxpayers and ensure that the IRS has access to accurate data.
The IRS defines “brokers” as entities that take possession of the digital assets sold by their customers. This category includes custodial trading platform operators, certain digital wallet providers, digital asset kiosks, and specific payment processors for digital assets.
These brokers will be responsible for maintaining records of crypto purchases and sales throughout the year. Upon completion, they will issue a new form—known as the 1099-DA—to both investors and the IRS in early 2026.
Like other 1099 forms (which report dividend income, interest income, and capital gains), the information provided on the 1099-DA must be included in users’ 2025 income tax return, which will be filed in 2026.
Spot Bitcoin ETFs Now Subject To Third-Party Reporting
While the reporting of transaction information will begin in 2025, there is a notable delay regarding the reporting of cost basis—the price at which investors originally purchased a crypto asset—until 2026.
Jessalyn Dean, vice president of tax information at Ledgible, a crypto tax software provider, clarified that brokers will not be required to disclose cost basis information until the following tax year.
Additionally, if investors own shares in recently established spot Bitcoin exchange-traded funds (ETFs), they will encounter third-party reporting this year.
ETF providers will issue either a 1099-B or a 1099-DA, which will include proceeds from share sales and may also encompass any taxable events triggered by activities within the ETF.
Despite these new reporting requirements, it is important to note that they do not introduce new taxes for digital asset investors. Instead, they serve as a compliance mechanism aimed at ensuring taxpayers fulfill their tax obligations.
Ledgible’s CEO, Kell Canty, emphasized that this new system aims to reduce inadvertent errors and enhance compliance during the filing process.
The US Treasury echoed this sentiment, indicating that the introduction of the 1099-DA is designed to remind digital asset owners that their transactions are taxable.
At the time of writing, the market’s leading cryptocurrency, Bitcoin, is trading at $101,000, up 1.5% and 8% over the 24-hour and seven-day periods, respectively.
Featured image from DALL-E, chart from TradingView.com
