U.S. Treasury and IRS Set New DeFi Tax Reporting Requirements: What’s Next?
In a major regulatory shift, the U.S. Treasury Department and the IRS have announced new tax reporting requirements for decentralized finance (DeFi) platforms. Starting on January 1, 2027, digital asset brokers, including those working within DeFi ecosystems, will be required to report the gross proceeds from crypto transactions on a 1099 form. This new rule aligns DeFi brokers with traditional securities brokers and custodial crypto exchanges, creating a more standardized approach to tax reporting.
Aviva Aron-Dine, the Acting Assistant Secretary for Tax Policy, explained that the new regulations would help ensure consistent tax reporting across all taxpayers. She also highlighted that the updates aim to simplify the filing process for compliant individuals while closing the tax gap. The IRS believes these measures will make it easier and less costly for taxpayers to file their taxes correctly.
However, the announcement has not been well received by all. Key figures in the crypto industry, including Blockchain Association CEO Kristin Smith, have expressed strong concerns. Smith argued that the IRS’s decision could drive the U.S. crypto industry overseas, and warned of the potential negative impact on innovation. “We’re prepared to take aggressive action to fight back,” she stated, emphasizing the need for reform.
Other voices in the community, such as Paradigm’s Alexander Grieve, criticized the move as an overreach, citing the substantial reporting burden on DeFi platforms and the extensive access it gives the government to user data. As DeFi protocols typically operate in a decentralized manner, many believe that these new rules could undermine the core principles of privacy and autonomy that the space was built on.
Looking ahead, much of the focus is now on potential future changes in the regulatory landscape. With President-elect Donald Trump’s pledge to overhaul digital asset regulations and appoint crypto-friendly officials, including former SEC Commissioner Paul Atkins, the industry is hoping for a shift in direction. If Trump’s administration takes action, there could be a chance to scale back or modify these new tax requirements.
As the clock ticks toward the 2027 deadline, the DeFi community faces a crucial moment in navigating the future of crypto tax reporting. While the IRS’s rules are set to become law, the battle over their implementation may just be beginning.