The Senate’s vote last week to repeal the IRS’s decentralized finance broker reporting rule—following the House’s vote earlier last month—is a significant development for the cryptocurrency industry. While many in the industry weren’t too keen on the reporting rules for DeFi brokers due to the compliance cost and the potential to hinder innovation, a regulatory gap for DeFi remains.
Because these platforms aren’t subject to know-your-customer or information reporting, regulators have little visibility over taxable income and reporting responsibilities by crypto investors trading on decentralized exchanges.
Crypto investors also retain the burden of tracking, calculating, and properly reporting their taxable income earned on DeFi. Diligent recordkeeping and use of crypto tax software will be essential—at least until policymakers establish suitable DeFi compliance laws.
Current Reporting Framework
The Section 6045 broker reporting regulations for US custodial exchanges remain in effect despite the House’s vote. Starting in 2026, taxpayers who sell, trade, or exchange digital assets on centralized exchanges such as Coinbase and Kraken will receive a Form 1099-DA reporting their taxable exchanges (for the 2025 tax year).
Although this may seem like a breath of fresh air for those with clients active in the crypto markets, accurate reporting may not be so simple. For starters, cost-basis reporting isn’t required for transactions during the 2025 tax year, meaning taxpayers likely will receive 1099-DAs with gross proceeds but must calculate their tax basis and gains on their own.
Cost-basis reporting will start for transactions in the 2026 tax year, but this is unlikely to help many active crypto traders. This is because cost basis only will be available for digital assets that were purchased and never transferred outside of the exchange. Any investors opting for self-custody through crypto wallets, such as hardware wallets, will be left with the same problem—unreported tax basis and unknown gains.
Compliance Solutions
Investors still are responsible for tracking, reporting, and proving their cost basis due to the phased implementation of Section 6045 broker reporting and regulatory gaps for assets transferred off-platform.
Incomplete 1099-DA forms mean that taxpayers and the IRS will receive more information than ever on taxable disposals but will have to scramble to fill in the gaps. Crypto tax software historically has been one of the few viable solutions for active crypto investors, and the lack of complete reporting means that taxpayers and their advisers will need to keep relying on these tools to avoid overreporting taxable gains.
Crypto tax software also appears to be the best approach in the immediate future for those active in DeFi to properly track, consolidate, and report their taxable transactions.
Regulatory Considerations
Repealing reporting regulations is merely an extension of the road, not the final destination. Republicans say the repeal reduces compliance costs and ensures DeFi innovation will stay in the US.
Democrats have raised concerns that it will weaken the IRS’s ability to enforce tax compliance. Both views highlight valid concerns and underscore the need for compliance laws that are more in line with the technology, rather than trying to fit DeFi under traditional information reporting frameworks.
DeFi technology, driven by smart contracts enabling peer-to-peer exchanges without intermediaries, doesn’t easily align with Section 6045 reporting requirements, which rely on centralized entities verifying taxpayers’ identities and tracking all activity on the platform.
At the same time, information reporting is a critical component of tax compliance and fighting tax evasion. The repeal of the DeFi regulations will give the IRS, Congress, and the industry a chance to develop a regulatory framework that better suits the technology.
Developing such a framework should be a top priority. The Joint Committee on Taxation estimated that repealing DeFi reporting could cost $3.9 billion over the next 10 years. Even with broker reporting regulations for centralized exchanges, a key concern is that those looking to dodge taxes will switch from these exchanges to DeFi platforms—which means the regulatory gap’s cost could exceed that estimate.
Tax Adviser Implications
Clients active in DeFi must understand that this repeal doesn’t exempt them from tax obligations. The IRS retains the authority to pursue unreported income and gains via audits and other methods, such as blockchain forensic tools to track blockchain activity.
Advisers must emphasize the importance of keeping detailed records, proactively tracking activity across these platforms, and using tools such as crypto tax software to stay compliant. The lack of DeFi reporting will maintain compliance burdens for taxpayers and their advisers.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Author Information
David Canedo is a cryptocurrency tax specialist at CoinTracker.
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