Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
The US tax agency, the Internal Revenue Service (IRS) recently finalized a new set of regulations that now require brokers to report digital asset transactions after decentralized finance (DeFi) platforms got integrated into the existing tax framework.
The rules are set to take effect in 2027, and they will obligate brokers to disclose transaction details, including taxpayer information and their gross proceeds.
The new regulations mostly focus on trading front-end service providers. Mainly, this includes decentralized exchanges, or DEXes, as they are popularly called within the crypto sector. These are decentralized trading platforms that enable digital asset transactions, and according to the IRS, they perform intermediary roles. The fact that they are classified as brokers will help ensure tax compliance.
Any platform that offers the sale or exchange of digital assets, even if it is done through smart contracts, may be considered a broker under the new rules, if they exert sufficient control over transactions. The definition aligns with the IRS’ long-standing approach to brokers, which has been in place for more than 40 years now, as the agency claims.
Who Will Be Affected By The New Regulations?
The IRS stressed that only DeFi participants who are treated as brokers and are trading front-end service providers will be affected by the new regulations. That means that DeFi applications will not be included, nor their varying degrees of decentralization. Instead, the scope is narrowed to platforms that actively facilitate transactions for customers.
The regulations will apply to digital asset transfers starting in 2027, but brokers will be required to start collecting and reporting the necessary data in 2026. The agency expects that somewhere between 650 and 875 brokers will be affected, but that the introduction of new laws will impact 2.6 million taxpayers.
However, the IRS argues that this should not be taken as a new measure, but rather that it is consistent with existing broker regulations. It was not meant to discriminate against the DeFi industry, but rather to give it the same status as traditional brokers.
The agency still views crypto assets as property, rather than currency, which is in line with its regulatory guidance that came out seven years ago. As a result, the IRS will continue to tax crypto profits and losses as those for stocks, at capital gains rates.
