A recent poll of 1,000 US investors in digital assets found that over half fear they will face an IRS tax this year as new transparency rules for crypto exchanges take effect.
The data collected at the end of January by the crypto tax platform Awaken Tax examined the concerns of US holders about a radical shift from self-disclosure to automatic reporting of transactions.
This has been enacted through the introduction of “Digital Asset Proceeds From Broker Transactions” or Form 1099-DA, which tens of thousands of Americans will be made aware of over the next month or so.
The new rules are designed to crack down on tax evasion and force brokers, such as crypto exchange Coinbase (COIN), to report all sales and exchanges of digital assets that took place during 2025 to the tax authority.
The goal is to give tax authorities a clear view of investors’ gains and losses by opening up customer data inside exchanges for the first time, allowing the IRS to compare what crypto brokers report with what taxpayers record.
While the goal is to remove any margin for error, the rules are a “blunt instrument,” created by lawmakers who know nothing about crypto, according to Awaken Tax founder Andrew Duca.
“This means that crypto is treated like stocks, but it doesn’t behave that way. Real crypto users will move assets between multiple wallets and interact with decentralized finance (DeFi) protocols using fairly complex trading strategies,” Duca said.
Companies like Coinbase can only provide information on the proceeds from the sale of crypto and are unable to report the tax basis of a given digital asset — typically the purchase price plus acquisition costs — which can then be used to calculate capital gains or losses on its sale.
“Coinbase can’t actually send the right information, because you can imagine if someone has bitcoin in a cold storage ledger, they send it to Coinbase to sell. Coinbase doesn’t know your purchase price, what you bought it for. So Coinbase sends wrong forms to the IRS. The 1099-DA form reports income, but it’s not the tax base,” he says.
Coinbase is well aware of the confusion this will cause. It is up to the holder of crypto to “patch” what is missing in terms of their crypto acquisition cost and actual tax basis via the IRS’s updated Form 8949, Duca said.
Duca acknowledges that crypto tax compliance is extremely low: Less than 20% of crypto holders report what they should, he said.
“It’s really not well thought out and kind of scary for crypto users. But it’s what they could do the fastest and easiest,” Duca said. “They just added this super blunt instrument to try and get that 20% up to 80% in a year.”
