Doing taxes on cryptocurrencies this year is going to suck.
Over the past decade, the IRS has treated cryptocurrency as property rather than currency, treating every sale and exchange as a taxable event. However, although blockchains are public ledgers, tax compliance rates have historically been low. The gap between what the IRS expects and what cryptocurrency users actually pay in taxes has been growing for years.
This gap is about to narrow significantly.
We are entering the “enforcement era” of crypto taxes
Change didn’t happen overnight. In 2021, the IRS launched Operation Hidden Treasure to target the deliberate concealment of crypto income. By 2022, it had hired agents with specialist blockchain expertise and obtained court orders for data from major exchanges, including Coinbase. The message was clear: the era of laxity was coming to an end.
Today, in 2026, we see authorities taking a significant further step. This marks what I would call the beginning of the end of crypto tax avoidance, not only in the United States, but around the world.
Forty-eight countries, including the US, UK, EU members and Brazil, have agreed to implement the OECD’s Crypto Asset Reporting Framework (CARF). All crypto-asset service providers must now report user transaction data to authorities. In the UK, HMRC recently sent 650,000 cover letters to crypto investors who needed to pay tax, an increase of 134% from last year.
In the United States, the change is even more concrete. For the first time, cryptocurrency exchanges will issue Form 1099-DA, a new document that reports your cost basis and will be transmitted directly to the IRS. It is similar to the 1099-B used for stocks, and brokers were required to issue them by February 17, 2026, covering all sales and exchanges starting in 2025. Starting in tax year 2026, brokers will also report cost basis, giving the IRS an unprecedented view of investors’ gains and losses.
This represents a fundamental shift from self-disclosure to automatic reporting. The IRS can now easily compare what brokers report with what taxpayers report, making it easier to detect errors, omissions and underreporting.
I keep seeing crypto investors on X and Reddit saying that the government will eventually remove taxes on crypto. They won’t. Users need to stop waiting for this to happen.
The problem: The rules are written by people who don’t use cryptocurrency.
Form 1099-DA was clearly written by legislators who know nothing about cryptography, which is unfortunate.
These regulations treat cryptocurrencies like stocks, but cryptocurrencies do not behave like stocks. Real crypto users don’t just buy and hold Coinbase. They move assets between multiple wallets, link chains, interact with DeFi protocols, provide liquidity, stake tokens, and use complex trading strategies across dozens of platforms. Many of these activities involve transactions outside of centralized exchanges. This is where the new reporting framework fails.
The new rules are going to be a real burden on anyone using crypto the way it was designed to be used. This is a problem that goes beyond simple inconvenience to individuals and will have significant repercussions for the entire industry.
If interacting with DeFi creates a huge tax compliance problem, fewer people will use it. If moving assets into their own custody means drowning in paperwork, people will leave their funds on the exchanges. While these regulations are inevitable and well-intentioned, they risk pushing users back toward the centralized systems that crypto was intended to replace.
The real headaches are just beginning
I spend a lot of time interacting with the crypto community online and have seen countless users try to file their taxes manually, hit a wall, and then give up.
If you haven’t filed cryptocurrency taxes in the past, now is the time. We have users who constantly message us and need to file for years past. I’ve even seen investors try to file four or more tax years at once. They’ve probably never filed a complaint before, and now they’re scrambling because they know enforcement is ramping up.
The trick is to constantly pull your records, not just during tax season. Many trading platforms delete historical data after a certain period of time, but the IRS sees large flows when you log out and wants to know where that money came from. Without these business records, you cannot prove your cost basis or demonstrate your losses.
What’s Next for Cryptocurrency Tax Reporting?
It is clear that we are entering a new phase of tax reporting on cryptocurrencies. We are moving from a vague regulatory gray area to transparency and much stricter enforcement.
The crypto industry needs to adapt to this reality now, rather than fighting or ignoring it. The message to investors is clear: be compliant now. Gather documentation for all purchases, sales, and transfers between wallets and exchanges. The longer you wait, the harder it will be.
The challenge for the crypto industry is different: we must continue to develop tools that are agile and able to adapt to the rapid pace that the application of these rules introduces. Ultimately, we need to make tax reporting as simple as possible for investors, so the sector can continue to thrive.
