Navigating US Treasury Department Guidance for Digital Assets

What’s a digital asset? 

• Digital assets include any digital representation of value that is recorded on a cryptographically secure distributed ledger, even if not every transaction is individually recorded.

• Stablecoins and NFTs are considered in scope.

Who is a digital asset broker? 

• Digital asset brokers include any person who provides services facilitating the sale or exchange of digital assets, including centralized exchanges, digital asset payment processors, and certain decentralized protocols where there is sufficient control or influence over the protocol to make changes to it.

What types of new reporting will be required for digital asset brokers?

• Broker Reporting: Digital asset brokers will be required to issue annual broker information returns, like a 1099-B (Form 1099-DA isn't specifically referenced in the proposed regulations, the IRS has commented publicly about creating the new form).

• Form W-9/W-8: A critical component of broker payments and reporting is the collection of certified TINs, which is achieved by collecting a Form W-9. Compliance is required for new accounts starting 1/1/2025 and pre-existing/non-US accounts by 12/31/2025.

• Cost Basis: Track and report cost basis information for disposed of assets down to the unit level, including selection of accounting method (e.g. FIFO) and/or determination of cost basis lot used at time of sale. Compliance date is 1/1/2023 for knowing cost basis of continuously hosted assets.

• Voluntary reporting: The IRS is supporting voluntary broker reporting for tax years prior to 2025 & 2026 by providing penalty waivers for early filers.