A recent survey of 1,000 American digital asset investors found that more than half are afraid of facing a tax penalty from the IRS this year as new transparency rules governing crypto exchanges come into effect.
Data collected in late January by crypto tax platform Awaken Tax surveyed US holders’ concerns about a radical shift from self-disclosure to automatic transaction reporting.
This has been enacted through the introduction of the “Digital Asset Income from Broker Transactions,” or Form 1099-DA, which will be reported to tens of millions of Americans over the next month.
The new rules are designed to clamp down on crypto tax evasion and force brokers, such as cryptocurrency exchange Coinbase (COIN), to report to the tax agency all digital asset sales and exchanges that took place during 2025.
The goal is to give tax authorities a clear view of investors’ profits and losses by opening up customer data within exchanges for the first time, allowing the IRS to compare what cryptocurrency brokers report with what taxpayers report.
While the goal is to eliminate 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.
“It means that cryptocurrencies are treated like stocks, but do not behave that way. Real cryptocurrency users will move assets between multiple wallets and interact with decentralized finance (DeFi) protocols, using quite complex trading strategies,” Duca said.
Companies like Coinbase can only provide information on revenue from cryptocurrency sales and cannot report the tax basis of any given digital asset (typically the purchase price plus acquisition costs) which can then be used to calculate capital gains or losses upon sale.
“Coinbase can’t actually send the correct information, because you can imagine that if someone has bitcoin in a cold storage wallet ledger, they send it to Coinbase to sell it. Coinbase doesn’t know its acquisition price, or what it was bought for. So Coinbase is sending incorrect forms to the IRS. The 1099-DA form reports income, but it doesn’t report tax basis,” Duca said.
Coinbase is well aware of the confusion this will cause. The onus is on the cryptocurrency holder to “patch” what is missing in terms of their cryptocurrency acquisition costs and actual tax basis through the updated IRS Form 8949, Duca said.
Duca acknowledges that cryptocurrency tax compliance is extremely low: Less than 20% of cryptocurrency holders report what they should, he said.
“It really hasn’t been well thought out and it’s a horrible thing for cryptocurrency users. But it’s what they could do faster and easier,” Duca said. “They just added this super blunt instrument to try to get that 20% up to 80% in a year.”
