IRS and US Treasury to Regulate Crypto Brokers by 2026
- The IRS and the Department of Treasury seek to regulate crypto brokers by January 1, 2026.
- The two federal agencies have shared their proposal with the Federal Register.
- Brokers will have to report “gross proceeds for all sales or exchanges of digital assets starting on January 1, 2025.”
- The IRS and the US Treasury refers to crypto brokers as “digital asset middlemen.”
The Internal Revenue Service (IRS) and the Department of Treasury have teamed up to propose the regulation of digital asset brokers in the United States. Interestingly, the two federal agencies have released a set of regulatory guidelines that contain the requirements that brokers need to follow to continue providing their services to their customers in the region.
The regulation of cryptocurrencies has become a major issue for crypto exchanges and digital asset service providers in the United States. Moreover, under the Biden administration, multiple crypto firms have faced federal scrutiny, while many firms have paid heavy fines for offering the sale of cryptocurrencies, which the United States Securities and Exchange Commission (SEC) considers securities.
It is important to mention here that, as per the Office of Advocacy of the US Small Business Administration, the IRS and the US Treasury proposed the regulatory requirements for crypto brokers on August 29.
“The proposed rules would require digital asset brokers, including trading platforms, payment processors, and certain hosted wallet providers, to report gross proceeds for all sales or exchanges of digital assets starting on January 1, 2025.”
The proposal presented by the IRS and the US Treasury refers to crypto brokers as “digital asset middlemen,” while adding that these platforms will be required to provide information on gains and losses incurred during the sale of crypto assets. Interestingly, the proposal added that the requirements will kick in on or after January 1, 2026.
Additionally, as per the document that was shared with the Federal Register, the regulatory proposal will seek to deliver “higher levels of taxpayer compliance,” as the IRS would get greater clarity on the income that is generated by the taxpayers that are involved in the crypto sector. Moreover, the agencies have also asked small businesses to share how the regulations would impact them, which will be supported by a public hearing on November 7, 2023.
Interestingly, once the proposal from the IRS and the Treasury is signed into law, crypto brokers will be required to file information returns with the IRS using the new Form 1099-DA. Brokers will also have to provide payee statements to customers.
As reported earlier by Bitnation, the IRS ordered crypto exchange Kraken to share blockchain addresses and transaction hashes for certain customers.