The U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued the final regulations for reporting requirements for DeFi brokers.
DeFi brokers are front-end service providers interacting directly with customers on digital asset transactions.
The final rules do not change or impose any new tax obligations on digital assets. Instead, the rules require brokers – not digital asset holders – to report on the gross proceeds of the sale of their digital assets through a Form 1099.
These rules ensure DeFi brokers of digital assets are subject to the same information reporting rules as brokers for securities and operators of custodial digital asset trading platforms.
“These regulations will help ensure that all taxpayers play by the same set of rules and have access to the information they need to file their taxes accurately,” Aviva Aron-Dine, performing the duties of assistant secretary for tax policy, said. “Aligning tax reporting requirements for digital assets with reporting for other assets will make filing easier and cheaper for compliant taxpayers while also helping close the tax gap.”
With this new rule, the owner of a digital asset who engages in DeFi transactions will receive a Form 1099 from brokers and be reminded that those transactions are taxable. This will reduce the number of inadvertent errors or noncompliance on the taxpayer’s federal income tax returns and save taxpayers time and money during the filing process.
Earlier this year, the Treasury published final regulations addressing reporting requirements primarily for custodial brokers.