As crypto moves from the fringes to the mainstream, the global tax "dragnet" is tightening. Following the official release of the 2025 version of the digital asset broker information return (Form 1099-DA) and its operating instructions, the IRS recently dropped two updated sets of detailed rules.
This move does more than just clarify the mandatory reporting duties for brokers; it uses supplemental rules to nail down "De Minimis" exemption thresholds and introduces "Optional Reporting Methods" for stablecoins and "Specified NFTs." This isn't just a simple form update. It shows that regulatory granularity has reached a "per-coin" level. While ensuring tax transparency, the authorities are using differentiated rules to lower the compliance burden for everyone in the market. This article breaks down the recent Form 1099-DA updates and analyzes the IRS's current regulatory direction to provide a handy compliance reference.
Form 1099-DA is the information return used by digital asset brokers to report gains and losses from digital asset transactions to both the IRS and their customers. It isn't just a patch on an old system; it’s a specialized form designed specifically for the unique "native" properties of digital assets.
According to the latest Instructions for Form 1099-DA (2025), starting January 1, 2025, brokers must record and report the "Gross Proceeds" of every transaction. Interestingly, the IRS isn't forcing the reporting of "Cost Basis" or the nature of gains/losses for 2025 yet. Instead, they’ve given brokers a voluntary reporting grace period, explicitly stating that there won’t be penalties for reporting errors during this time. The mandatory duty to report cost basis and gain/loss nature has been pushed to 2026 (for "covered digital assets" acquired after January 1, 2026). This transition period gives brokers a year to tune their systems and solve legacy headaches like verifying on-chain ownership and tracing historical costs.
Furthermore, the 1099-DA instructions demand much finer data granularity in two ways: first, "uniquely identifying" assets by introducing standardized DTIF (Digital Token Identifier Foundation) codes to stop naming confusion; and second, "structuring" the nature of transactions by isolating specific asset flows. This allows for the separation of "Primary Sale" proceeds from investor trading gains. Specifically, the IRS added "Box 11c" to isolate the original minting proceeds of NFT creators from the secondary market gains of investors for the first time, ensuring the data the IRS receives is much more precise.
Digital Assets: Per the 1099-DA, a digital asset is any digital representation of value recorded on a cryptographically secured distributed ledger (like a blockchain) or similar technology, regardless of whether every specific transaction is actually recorded on that ledger. It does not include "cash" (USD or any convertible foreign currency issued by a government or central bank). Therefore, the IRS definition is massive, covering almost any digital value on a ledger, including crypto, tokenized securities, and specified NFTs.
Qualifying Stablecoins: A digital asset is a "Qualifying Stablecoin" if it meets three criteria: (1) it aims to track a single convertible currency (like USD) at a 1:1 ratio; (2) it uses an effective stabilization mechanism; and (3) it is generally accepted as a payment method by parties other than the issuer.
Regarding the filers, 1099-DA mainly targets brokers and digital asset middlemen.
Brokers: Based on the updated regulations for Section 6045 of the Internal Revenue Code, a broker is anyone who, in the ordinary course of business, stands ready to effect sales of digital assets for others. Specifically, you are a broker if you: (1) regularly offer to redeem digital assets you created or issued; or (2) act as an agent, dealer, or middleman to effect the disposal of a customer's digital assets.
Digital Asset Middleman: This refers to someone who provides services that facilitate the sale of digital assets and is in a position to know the identity of the seller and the nature of the transaction.
You count as a digital asset middleman if you:
(1) accept or process digital assets as payment for stocks, commodities, regulated futures, options, or debt instruments;
(2) are a real estate reporting person who knows (or should know) that a buyer is using digital assets;
(3) accept digital assets as payment for brokerage services;
(4) own or operate digital asset kiosks (ATMs); or (5) are a Digital Asset Payment Processor (PDAP).
You are NOT a digital asset middleman if you: (1) only provide Proof of Work (PoW) or Proof of Stake (PoS) validation services (mining/staking) without other functions; or (2) only provide hardware or software that lets users control their own private keys (like non-custodial wallets) without other services.
In short, "middlemen" covers everything from traditional CEXs (Centralized Exchanges) to custodial wallet providers, PDAPs, and kiosk operators.
To help visualize how unique the 1099-DA is, the table below compares it to traditional finance and payment forms.
The following table:
The structure of Form 1099-DA mirrors the traditional Form 1099-B for securities but adds several specific boxes for crypto features:
Box 1a & 1b (Digital Asset Code and Name): Mandatory use of DTIF codes. If a token doesn't have one, use "999999999." For the optional aggregate reporting of NFTs, Box 1a uses "999999999" and Box 1b says "Specified NFTs." For stablecoins using the aggregate method, Box 1a uses the DTIF and Box 1b uses the name.
Box 1f (Gross Proceeds): This can include cash plus the fair market value of services, digital assets, or other property received.
Box 1g (Cost Basis): While voluntary for 2025, this will be the heart of calculating profit and loss in the future.
Box 11a & 11b (Aggregate Reporting Checkboxes): Special paths designed for stablecoins and NFTs to record if the optional reporting method was used and how many transactions it covers.
Box 11c (Primary Sale): Specifically captures the original proceeds for NFT creators at the minting stage, separating them from secondary market flips.
In August 2021, the Infrastructure Investment and Jobs Act (IIJA) passed the Senate and was signed into law in November. This act amended Section 6045 of the Internal Revenue Code, officially bringing "digital assets" into the legal definition of "broker" reporting to boost tax transparency through automated third-party reporting.
After two years of expert consultation and public debate, on July 9, 2024, the Treasury and the IRS officially released Treasury Decision 10000 (Gross Proceeds and Basis Reporting by Brokers and Determination of Amount Realized and Basis for Digital Asset Transactions, or TD 10000). This regulation went into effect on September 9, 2024, legally defining who counts as a broker, which transactions need reporting, and how to calculate cost basis.
TD 10000 mandates that 1099-DA officially kicks off in 2026, with every box on the form backed by the legal logic of TD 10000, requiring brokers to report proceeds and basis info starting from January 1, 2025.
It's important to note that the 1099-DA isn't just a solo move by the US; it matches the global trend toward tax transparency. In late 2022, the OECD released the Crypto-Asset Reporting Framework (CARF) to create a global standard for the automatic exchange of tax info. On November 10, 2023, the US and over 40 other countries pledged to fast-track CARF. On July 30, 2025, the US proposed a fact sheet to implement CARF. On November 14, 2025, the IRS submitted the CARF: US Broker Digital Transaction Reporting proposal to the White House for review. If implemented, this would allow the IRS to get key info on overseas crypto accounts held by US taxpayers for tax enforcement.
While the US hasn't signed a multilateral CARF agreement or started automatic data swaps yet, the launch of 1099-DA shows the US has already built the underlying data collection system. This lays the technical foundation for future international tax data exchanges.
Lately, the IRS has really picked up the pace on crypto regulation. Their new detailed rules show that they are moving past "big picture" compliance into specific, actionable standards that focus on efficiency.
While keeping things strict, the IRS has shown some flexibility. By nesting "De Minimis Rules" (small exemptions) within "Optional Reporting Methods," they’ve created a filter system to reduce redundant regulation.
Here’s how it works: Brokers first check if a transaction qualifies for an "Optional Reporting Method" based on the type of asset. Once that method is chosen, the IRS sets a specific "De Minimis threshold." If the transaction is below that amount, you don't even have to file the 1099-DA.
Optional Reporting Methods decide "How to report": For stablecoins with tiny price swings and NFTs used for consumption, the new rules let brokers skip "Transactional Reporting" (reporting every single trade) and use "Aggregate Reporting" (summarizing everything) instead.
De Minimis Rules decide "Whether to report": To prevent a flood of tiny retail data (like buying coffee with crypto) from crashing the tax system, the IRS set different thresholds:
PDAP Sales Threshold: $600 If a Digital Asset Payment Processor (PDAP) handles less than $600 in total payments or related transactions for a single customer in a year, they don't need to file a 1099-DA.
Qualifying Stablecoin Optional Reporting Threshold: $10,000 For stablecoins using the summary method, if a customer's total annual proceeds (minus costs) don't exceed $10,000 at a specific broker, no filing is needed.
Specified NFTs Optional Reporting Threshold: $600 For NFTs using the summary method, if the customer's total annual proceeds (minus costs) across all specified NFTs don't exceed $600, the broker is off the hook for filing.
Another technical tweak: The IRS clarified that for the 2025 tax year, the 1099-DA will not be part of the "Combined Federal/State Filing (CF/SF) Program." This means brokers can't just click one button to send data to both the feds and the states. They may have to submit data to state tax authorities separately based on local laws.
Faced with the challenges of the 1099-DA, high-net-worth investors, project teams, and Web3 institutions need to get used to these new rules fast. For Web3 Participants, managing transaction data isn't just about avoiding an IRS audit—it's about cleaning up your own financial picture. In this wave of transparent regulation, the ones who move from "messy books" to "tax compliance" first will be the ones who find long-term certainty in the competitive global Web3 market.
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