From 2027, DeFi trading platforms in the U.S. will have to report cryptocurrency transactions to the IRS.
On December 27, the U.S. Internal Revenue Service (IRS) officially issued regulations requiring brokers in the digital asset sector, including decentralized finance (DeFi) trading platforms, to report cryptocurrency transactions. The regulation is expected to take effect in 2027, marking a significant turning point in the oversight and tax management of the rapidly growing cryptocurrency market.
Specifically, starting from 2026, brokers will be required to collect data and from 2027, officially disclose information about the total amount received from cryptocurrency sales and other digital assets, while providing information related to taxpayers participating in transactions.
This means that the operations of DeFi platforms will become more transparent in the eyes of the tax authorities. The IRS estimates that the new regulation will impact approximately 2.6 million taxpayers and between 650 to 875 DeFi brokers.
The IRS classifies front-end DeFi trading platforms as brokers for tax reporting purposes. Source: U.S. Department of the Treasury Scope and Objective of the Regulation
A notable point of the regulation is its scope of application. The IRS clarified that only 'trading front-end service providers' in the DeFi space will be considered brokers and must comply with reporting regulations. This means that not all DeFi applications will be directly affected, with the focus placed on platforms that provide trading interfaces for users.
According to the regulation, platforms that perform intermediary functions in digital asset transactions, including groups of individuals supporting transactions 'whether or not operating through a legal entity,' will be considered. If a DeFi platform participates in facilitating the buying and selling of digital assets, even through smart contracts, and has significant control or influence over the transaction process, that platform may be classified as a broker according to the IRS definition.
The IRS affirmed that the goal of the regulation is not to target the DeFi industry but to establish a level playing field, applying similar regulations that have been in place for traditional brokers for over 40 years.
The agency believes that reporting information from DeFi brokers will help enhance tax compliance, especially for taxpayers who conduct cryptocurrency transactions without going through custodial brokers. This will provide both the IRS and taxpayers with a clearer view of income from digital asset transactions.
The IRS dismissed the view that the above regulation reflects favoritism towards the DeFi industry or will hinder the development of this technology. The agency believes that providing transparent information about the total amounts received, similar to how custodial brokers operate, will benefit users.
