Taxing cryptocurrencies this year is going to suck.
For the past decade, the IRS has treated cryptocurrencies as property rather than currency, treating each sale and exchange as a taxable event. However, even though blockchains are public ledgers, tax compliance rates have always been low. The gap between what the IRS expects and what cryptocurrency users actually pay in taxes has been growing for years.
That gap is about to close significantly.
We are entering the ‘enforcement era’ of crypto taxes
The change did not happen overnight. In 2021, the IRS launched Operation Hidden Treasure to combat the deliberate concealment of crypto income. By 2022, it had hired agents with specialized blockchain experience and obtained court orders for data from major exchanges, including Coinbase. The message was clear: the era of lax enforcement was ending.
Now, in 2026, we are seeing authorities take a significant step further in this. This marks what I would call the beginning of the end of cryptocurrency tax evasion, not just in the United States, but around the world.
Forty-eight countries, including the US, UK, EU members and Brazil, have agreed to implement the OECD Crypto Asset Reporting Framework (CARF). All cryptoasset service providers are now required to report user transaction data to authorities. In the UK, HMRC recently issued 650,000 nudge letters to crypto investors who owed taxes, 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 their cost basis and proceeds directly to the IRS. It’s similar to the 1099-B used for stocks, and brokers had to issue them by Feb. 17, 2026, covering all sales and trades starting in 2025. From tax year 2026 onward, brokers will also report cost basis, giving the IRS unprecedented insight into investors’ profits and losses.
This represents a fundamental shift from self-disclosure to automated reporting. The IRS can now easily compare what brokers report to what taxpayers report, making errors, omissions, and underreporting easier to detect.
I keep seeing cryptocurrency investors on X and Reddit saying that the government will eventually eliminate taxes on cryptocurrencies. They won’t. Users should stop waiting for that to happen.
The problem: the rules are written by people who don’t use cryptocurrencies
Form 1099-DA was clearly written by legislators who know nothing about crypto, which is unfortunate.
These regulations treat cryptocurrencies like stocks, but cryptocurrencies do not behave like stocks. Real cryptocurrency users don’t just buy and hold Coinbase. They move assets between multiple wallets, connect 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 who uses cryptocurrencies the way they were designed. This is a problem that goes beyond mere annoyance for individuals and will have significant implications for the industry as a whole.
If engaging with DeFi creates a huge tax compliance problem, fewer people will use it. If moving assets into self-custody means drowning in paperwork, people will leave their funds in the exchanges. Although these regulations were inevitable and well-intentioned, they risk pushing users back to the centralized systems that cryptocurrencies were meant to replace.
The real headaches are just beginning
I spend a lot of time interacting with the crypto community online and have seen countless users try to file their taxes manually, hit a wall, and then give up.
If you haven’t filed cryptocurrency taxes in the past, now is the time. We have users who send us messages constantly and need to present several previous years. I’ve even seen investors try to report on four or more fiscal years at once. They’ve probably never filed it before and now they’re fighting because they know enforcement is increasing.
The trick is to check 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 it leaves and wants to know where that money originated. Without those business records, you cannot prove your cost basis or demonstrate losses.
What’s next for cryptocurrency tax filing?
It is clear that we are entering a new phase of crypto tax filing. It is moving from being a vague and gray regulatory area to being transparent and applying much stricter enforcement.
The crypto industry needs to adapt to this reality now, rather than fighting it or ignoring it. The message to investors is clear: deliver now. Gather documentation for all purchases, sales, and transfers between 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 these rules are being introduced. Ultimately, we must make filing taxes as easy as possible for investors, so the industry can continue to thrive.
