Doing crypto taxes this year is going to suck.
For the past decade, the IRS has treated cryptocurrency as property rather than currency, treating every sale and exchange as a taxable event. Despite blockchains being public ledgers, tax compliance rates have always been low. The gap between what the IRS expects and what crypto users actually pay in taxes has been growing for years.
That gap is closing significantly.
We’re Entering the Crypto Tax ‘Enforcement Era’
The shift did not happen overnight. In 2021, the IRS launched Operation Hidden Treasure to target willful concealment of crypto income. By 2022, it had hired agents with specialized blockchain expertise and secured court orders for data from major exchanges, including Coinbase. The message was clear: the era of lax enforcement was coming to an end.
Now, in 2026, we see the authorities taking this a significant step further. This marks what I would call the beginning of the end for crypto tax avoidance, not just in the US, but worldwide.
48 countries, including the US, UK, EU members and Brazil, have agreed to implement the OECD’s Crypto-Asset Reporting Framework (CARF). All crypto asset providers must now report user transaction data to the authorities. In the UK, HMRC recently issued 650,000 nudge letters to crypto investors who owed tax, a 134% increase compared to 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 declares your cost basis and goes directly to the IRS. It’s similar to the 1099-B used for stocks, and brokers had to issue them by February 17, 2026, covering all sales and exchanges from 2025. From tax year 2026 onward, brokers will also report cost basis, giving the IRS an unprecedented view of investors’ gains and losses.
This represents a fundamental shift from self-reporting to automatic reporting. The IRS can now easily compare what brokers report with what taxpayers record, making errors, omissions and underreporting easier to detect.
I keep seeing crypto investors on X and Reddit saying that the government will eventually remove taxes from crypto. They won’t. Users need to stop waiting for that to happen.
The problem: rules are written by people who don’t use crypto
Form 1099-DA was clearly drafted by lawmakers who know nothing about crypto, which is unfortunate.
These rules treat cryptocurrency like stocks, but crypto behaves nothing like stocks. Real crypto users don’t just buy and hold on Coinbase. They move assets between multiple wallets, bridge across 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 falls short.
The new rules will be a real burden on anyone using crypto as it was designed to be used. It is a problem that goes beyond mere annoyance to individuals and will have significant implications for the industry as a whole.
If interacting with DeFi creates a major tax compliance issue, fewer people will use it. If moving assets to self-custody means drowning in paperwork, people will leave their money in exchanges. While these regulations were inevitable and well-intentioned, they risk pushing users back to centralized systems that crypto was meant to replace.
The real headache has just begun
I spend a lot of time engaging with the crypto community online, and I’ve seen countless users try to file their taxes manually, hit a wall, and then give up.
If you haven’t filed crypto tax before, now is the time. We have users constantly messaging us and needing to file several previous years. I’ve even seen investors try to report four or more tax years at once. They’ve probably never reported before, and now they’re doing it because they know enforcement is increasing.
The trick is to pull your records constantly, not just during tax season. Many trading platforms delete historical data after a certain period, but the IRS sees large flows when you jump out and want to know where the money came from. Without these trading records, you cannot prove your cost base or show losses.
What’s Next for Crypto Tax Reporting?
It is clear that we are entering a new phase of crypto tax reporting. It is shifting from being a vague, regulatory gray area to transparency and much tighter enforcement.
The crypto industry needs to adapt to this reality now, instead of fighting or ignoring it. The message to investors is clear – comply now. Collect documentation for all purchases, sales and transfers across 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 can adapt to the rapid pace at which enforcement is introducing these rules. Ultimately, we need to make tax reporting as easy as possible for investors so the industry can continue to thrive.
