IRS Finalizes DeFi Broker Rules Requiring Form 1099 and User Trading Information by January 1, 2027

Dec 27, 2024, 06:15 PM

The U.S. Treasury Department and the Internal Revenue Service (IRS) have finalized new reporting requirements for decentralized finance (DeFi) brokers, mandating that they collect and report user trading information. This regulation, which is set to take effect on January 1, 2027, requires brokers to disclose gross proceeds from digital asset transactions and provide customers with Form 1099, including sensitive details such as names and addresses. The rules apply to all digital asset transactions, including sales of non-fungible tokens (NFTs) and stablecoins. The new requirements have sparked criticism from industry stakeholders, who argue that the rules are burdensome and could stifle innovation in the crypto sector. The IRS's decision to classify many DeFi front-end providers as brokers has raised concerns about privacy and compliance, with some experts predicting legal challenges and potential rollbacks by the incoming Congress. The finalization of these rules comes as part of a broader push by the outgoing Biden administration to regulate the cryptocurrency space more tightly.