The IRS's New Gaze on Digital Asset Transactions

The digital asset landscape has been abuzz with news of the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issuing final regulations regarding the reporting of sales and exchanges of digital assets. This move, effective from calendar year 2025, will require brokers who take possession of the digital assets being sold by their customers to report certain sale and exchange transactions. These brokers include operators of custodial digital asset trading platforms, certain digital asset hosted wallet providers, digital asset kiosks, and certain processors of digital asset payments (PDAPs).



The new regulations aim to help taxpayers file accurate tax returns with respect to digital asset transactions, which are already subject to tax under current law. The IRS is aware of the challenges that implementing new reporting requirements can pose, and it is providing transitional and penalty relief from reporting and backup withholding rules on certain transactions to help phase-in implementation.

Real estate professionals are also required to report the fair market value of digital assets paid by buyers and received by sellers in real estate transactions with closing dates on or after January 1, 2026. Additionally, the final regulations provide for an optional, aggregate reporting method for certain sales of stablecoins and certain non-fungible tokens (NFTs) applicable only after sales of these stablecoins and NFTs exceed de minimis thresholds. For PDAP transactions, the regulations require reporting on a transactional basis only if the customer’s sales are above a de minimis threshold.



The IRS is also providing rules for taxpayers to determine their basis, gain, and loss from digital asset transactions, as well as backup withholding rules. Basis reporting will be required by certain brokers for transactions occurring on or after January 1, 2026.

The new regulations reflect consideration of more than 44,000 public comments received last fall on the proposed regulations. IRS Commissioner Danny Werfel stated, "We reviewed thousands of public comments and believe this new guidance addresses those concerns while striking a balance between industry implementation challenges and closing the tax gap related to digital assets."

The implementation of these regulations is expected to improve detection of noncompliance in the high-risk space of digital assets and provide taxpayers with much-needed information, which will reduce burden and simplify the process of reporting their digital asset activity.