IRS Proposes Crypto Exchanges Shift to Mandatory Electronic Tax Documents

The US Internal Revenue Service (IRS) is seeking to require electronic delivery of tax forms to crypto exchange users.

Under the current rules, exchanges are required to provide paper copies of tax form 1099-DA, the IRS tax form used to document crypto transactions from a centralized exchange or broker, if users request paper forms.

The proposed new rules, slated to be published on Friday, remove this requirement and allow brokers to “terminate” their relationships with existing clients if they refuse electronic delivery of tax forms.

Additionally, the IRS proposal would prohibit users from retroactively revoking consent for electronic forms.

The IRS proposal would shift to mandated electronic tax forms. Source: Federal Register

The IRS requires all broker-dealers, platforms providing crypto services to users like exchanges, to report user proceeds from each transaction and to provide users with Form 1099-DA, detailing their transaction history for the tax season.

However, exchanges are not required to track cost basis for the 2025 tax year; tracking cost basis, or the price paid for each investment purchase, is the investor’s responsibility. The IRS outlined the reporting requirements for brokers:

One in five Americans, or about 55 million individuals, hold digital assets in the US, according to the National Cryptocurrency Association (NCA), a crypto advocacy group. 

Common barriers to entry cited by respondents. Source: NCA

Tax compliance was one of the biggest impediments to adopting crypto, with 10% of the 54,000 respondents in the NCA survey citing digital asset taxes as an issue.

More than one-third of the respondents indicated that they wanted more education on the tax implications of digital assets, according to the NCA.

39% of respondents said they wanted to better understand the tax implications of crypto. Source: NCA

Related: Crypto lobby Blockchain Association pitches tax plan to Congress

Concerns resurface after Trump killed the controversial “DeFi broker rule”

In December 2024, the IRS issued a rule classifying all front-end services, including decentralized exchanges (DEX) and decentralized finance (DeFi) platforms, as broker-dealers, subjecting them to tax reporting requirements.

This meant that DeFi platforms would have to collect know-your-customer (KYC) information and report proceeds from user sales to the IRS.

US President Donald Trump signed a resolution in April 2025 that killed the DeFi broker rule, which was well-received by the crypto industry. 

However, crypto industry executives have sounded the alarm about ambiguous language in the stalled CLARITY market structure bill that could force KYC reporting requirements onto DeFi platforms and limit activity in the nascent sector.

Magazine: Clarity Act risks repeat of Europe’s mistakes, crypto lawyer warns

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