Reporting Digital Assets: What US Investors Need to Know in 2026
A dynamic situation is developing as the Trump administration’s emphasis on innovation interacts with the established Internal Revenue Service (IRS) structure and its extensive capabilities for tax oversight.
While the government has abandoned the regulation-by-enforcement approach, tax attorney David Klasing warned in a recent interview that for the individual taxpayer, the “Wild West” era of crypto is officially over.
Even as the White House explores de minimis exemptions, it is simultaneously moving to implement global tax transparency standards. This duality has created a landscape where massive legislative victories for the industry, such as the repeal of certain accounting rules set during the previous administration, sit alongside an IRS that is now armed with automated artificial intelligence (AI) matching and specialized crypto-reporting forms.
Investors now face a new reality where transparency is mandatory, and the cost of hiding has never been higher.
Crypto tax classification
For tax purposes, the IRS views cryptocurrencies as property, similar to stocks or real estate, and not as money. Everything an individual does in crypto tends to fall into one of two buckets for the IRS: capital gains or ordinary income.
For example, if a person buys Bitcoin for US$5,000 and sells it for US$7,000, they realize a US$2,000 capital gain. They pay tax only when they sell the asset, trade for another cryptocurrency or buy something with it.
If a person earns crypto through staking rewards, airdrops, mining or as payment for work, the IRS treats the earnings as regular income. They owe tax on the fair market value of the coins on the day they received them.
Centralized exchanges like Coinbase Global (NASDAQ:COIN) and Kraken must send investors and the IRS Form 1099-DAC, showing sales and gains. They act as custodians because they hold your private keys and control your assets on your behalf. Because they have a traditional business structure and verify your identity, they are classified as brokers.
On the other hand, because of April 2025 legislation, the IRS has revoked previous strict reporting rules for DeFi platforms that do not have traditional gatekeepers, such as Uniswap and Aave. These decentralized exchanges and non-custodial wallets are generally not classified as brokers and do not have to issue Form 1099-DA.
This change occurred when President Donald Trump signed a resolution repealing the DeFi Broker Rule.
However, investors must still legally calculate and report all DeFi gains or income on their own using Form 8949 and Schedule D, even without a 1099-DA.
Regulatory tension and new thresholds
There is clear tension between the Trump administration’s desire to deregulate and the practical need for tax revenue to manage national debt in the US. The legislation nullifying the DeFi Broker Rule was a major blow to the…
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