coindesk.com
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. However, 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 about to close significantly.
We are entering the crypto tax ‘enforcement era’
The shift didn't happen overnight. In 2021, the IRS launched Operation Hidden Treasure to target deliberate 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 ending.
Now, in 2026, we're seeing authorities take this a significant step further. This marks what I'd call the beginning of the end for crypto tax avoidance, not just in the US, but worldwide.
Forty-eight countries, including the U.S., U.K., EU members and Brazil, have agreed to implement the OECD's Crypto-Asset Reporting Framework (CARF). All crypto-asset service providers must now report user transaction data to authorities. In the U.K., HMRC recently issued 650,000 nudge letters to crypto investors who owed tax, a 134% increase compared to last year.
In the U.S., the shift is even more concrete. For the first time, cryptocurrency exchanges will issue Form 1099-DA, a new document that declares your 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 February 17, 2026, covering all sales and exchanges from 2025. From the 2026 tax year onward, brokers will also report cost basis, giving the IRS an unprecedented view of investor gains and losses.
This represents a fundamental shift from self-disclosure to automatic reporting. The IRS can now easily compare what brokers report with what taxpayers file, making errors, omissions and under-reporting easier to detect.
I keep seeing crypto investors on X and Reddit saying the government will eventually remove taxes on 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
The Form 1099-DA was clearly drafted by legislators who know nothing about crypto, which is unfortunate.
These regulations 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 centralized exchanges. This is where the new reporting framework falls short.
The new rules are going to be a real burden for anyone who uses crypto the way it was designed to be used. That’s a problem that goes beyond mere annoyance for individuals and will have significant repercussions for the industry as a whole.
If interacting with DeFi creates a huge tax compliance problem, fewer people will use it. If moving assets to self-custody means drowning in paperwork, people will leave their funds on exchanges. Though these regulations were inevitable and well-intentioned, they risk pushing users back to centralized systems that crypto was meant to replace.
The real headaches are just beginning
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 taxes in the past, now is the time. We have users constantly messaging us, needing to file multiple past years. I’ve even seen investors trying to report on four or more tax years at once. They’ve probably never filed before, and now they’re scrambling because they know enforcement is ramping up.
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 offramp and wants to know where that money originated. Without those trading records, you can't prove your cost basis or show losses.
What’s next for crypto tax reporting?
It’s clear we’re entering a new phase of crypto tax reporting. It’s shifting from being a vague, regulatory gray area to transparency and much tighter enforcement.
The crypto industry needs to adapt to this reality now, rather than fight or ignore it. The message for investors is clear –get compliant now. Gather documentation for all purchases, sales and transfers across wallets and exchanges. The longer you wait, the harder it’s going to be.
The challenge for the crypto industry is different: we need to continue developing tools that are agile and can adapt to the fast 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.