The U.S. IRS announces a new cryptocurrency tax system: effective in 2025! DEX and wallet providers are temporarily not in charge of this

U.S. Internal Revenue Service Releases Final Draft of Cryptocurrency Tax Regulations

1. The United States Internal Revenue Service (IRS) has released the final draft of its cryptocurrency tax regime.

2. Reporting Requirements:

   • The IRS requires cryptocurrency brokers to submit "Form 1099-DA" similar to traditional investment companies.
   • This form will record the cost of user tokens, buy/sell dates, sales revenue and total proceeds.
3. Effective date: January 1, 2025

4. Unaffected entities:

   • Decentralized exchanges (DEX)
   • Operators of decentralized network facilities such as self-hosted wallets
5. Future plans: The IRS will implement taxes on the above entities through other special laws.

   

   IRS final draft of crypto tax rules

It is reported that the broker generally refers to centralized exchanges (CEX), managed wallet services and crypto payment providers, etc., and the tax collection scope covers cryptocurrencies and NFTs, and is drafted The following tax thresholds have been set:

• Ordinary investors and users whose annual stable currency income does not exceed US$10,000 are exempt from declaration.
• The same goes for those whose annual NFT income is less than $600.

And added, "More details are expected to be released on the official website on July 9."

In addition, starting from January 1, 2026, the rules will also be expanded to real estate transactions using cryptocurrency payments, real estate Brokers are also required to submit property values ​​and information for transactions via digital assets.

Encryption businesses that are temporarily exempt from the new rules

Faced with the fact that decentralized encryption businesses are more difficult to regulate, the IRS also stated that currently decentralized exchanges (DEX) and self-hosted wallets are not subject to the new tax regime constraint.

At the same time, crypto brokers are not required to declare the following transactions:

• Wrapping & unwrapping transactions
• Liquidity provider transactions
• Pledge transactions
• Lending by digital asset market participants Notional principal contract transactions (Notional principal contract transactions)
• IRS emphasis: The U.S. Department of the Treasury (DOJ) and the IRS expect to provide these brokers with a different regulation later this year. rule.

IRS: Narrowing tax gaps and strengthening compliance

IRS Director Danny Werfel wrote in a statement: This move will narrow the tax gap for digital assets and effectively monitor the occurrence of high-risk non-compliance in this field. degree.

And added, "IRS research and experience show that third-party reporting can improve compliance."

The encryption community reiterated privacy concerns and compliance costs

However, the encryption community and related industry organizations Expressed strong opposition to this, saying that the implementation of "Form 1099-DA" may create privacy issues.

The American blockchain advocacy organization Blockchain Association also mentioned in a letter to the IRS a few weeks ago that this rule will bring unnecessary burdens to investors, cryptocurrency companies and the IRS itself: According to the "Paperwork Reduction Act" (Paperwork Reduction Act), the authorities should not impose unnecessary paperwork requirements on individuals and entities participating in the financial system. The estimated 8 billion tax compliance forms produced each year will result in approximately 4 billion hours of wasted labor time and $254 billion in annual compliance costs.

And added, "However, this cost will ultimately only cover the annual tax gap of approximately US$10 billion, which is completely unreasonable."

Previously, regarding the Infrastructure Investment and Jobs Act (IIJA) that took effect in the United States earlier this year )", among which the "$10,000 Crypto Tax Law" has also been criticized for being unclear and difficult to comply with. The authorities later stated that there is no need to declare relevant details and personal information of crypto transactions until the new regulations are introduced.

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