Crypto Tax Reporting

Crypto tax reporting is a rapidly maturing area of fiscal policy, driven by governments’ recognition that the pseudonymous nature of crypto transactions created significant opportunities for tax evasion that required dedicated reporting infrastructure. The period from 2022 to 2026 saw the introduction of major new reporting frameworks in the US, EU, and globally, closing what had been a significant gap in tax authority visibility into crypto asset activity.

Taxable Events: The Foundation Question

Before reporting, jurisdictions must determine what constitutes a taxable event in crypto. The consensus across most major tax authorities is that the following trigger taxable events: disposal of a crypto asset for fiat currency (sale); exchange of one crypto asset for another (a disposal of the first asset at market value); use of crypto to purchase goods or services; receipt of crypto as payment for services; and receipt of crypto through mining (treated as income at the time of receipt). The more contested questions include: whether staking rewards are income at receipt or only on disposal; whether liquidity provision in DeFi constitutes a disposal; whether airdrops are income; and how to treat NFT minting and resale.

United States: 1099-DA

The IRS’s approach to crypto tax reporting crystallised in the Infrastructure Investment and Jobs Act (2021), which required brokers — defined broadly to include crypto exchanges, custodians, and payment processors — to report customer transactions to the IRS. The implementing regulations, finalised in 2024 and operational from 2025, require brokers to issue 1099-DA forms to customers and the IRS, reporting gross proceeds from crypto disposals. The 1099-DA regime mirrors the 1099-B form used for traditional securities: it provides the IRS with third-party corroboration of taxpayer-reported gains, enabling automated matching and increasing audit-triggering accuracy.

The DeFi broker rule — which would have extended reporting obligations to decentralised protocols — was enacted in regulations in late 2024 but was overturned by Congress using the Congressional Review Act in 2025, signed by President Trump. The status of crypto reporting obligations for decentralised platforms therefore remains unresolved in the US.

EU: DAC8

The EU’s Directive on Administrative Cooperation in the field of Taxation (DAC8), adopted in 2023 and requiring transposition by member states by December 2025, creates a domestic EU crypto reporting framework that complements CARF. DAC8 requires crypto-asset service providers operating in the EU to collect and report information about their customers’ crypto holdings and transactions to national tax authorities, which then exchange that information automatically with other EU member states. DAC8 covers crypto assets within the scope of MiCA, meaning it benefits from MiCA’s definitions and licensing infrastructure. The DAC8 reporting obligation applies to CASP customers who are EU residents, regardless of where the CASP is based.

India’s Tax Regime

India introduced one of the world’s most aggressive crypto tax regimes in its Union Budget 2022. A 30% flat tax applies to income from transfer of virtual digital assets, with no deduction allowed for any expense except the cost of acquisition, and no ability to offset crypto losses against other income. Additionally, a 1% Tax Deducted at Source (TDS) applies to each crypto transaction above a threshold amount, collected by the exchange or marketplace at the point of transaction. The TDS mechanism is designed to create a real-time trail of crypto transactions for the Income Tax Department, regardless of whether taxpayers accurately self-report gains. The regime is widely regarded as among the most punitive in the world, and has been credited with driving significant Indian crypto trading volume to offshore exchanges.

Cost Basis Methodologies

The method used to calculate the cost basis of disposed crypto assets significantly affects the taxable gain. First-In-First-Out (FIFO) assumes that the oldest acquired tokens are sold first; in a rising market, this tends to produce larger gains than other methods. Last-In-First-Out (LIFO) assumes the most recently acquired tokens are sold first; this is not permitted in the US for crypto or securities but is used in some other jurisdictions. Specific identification allows taxpayers to choose which specific tokens are disposed of, enabling tax optimisation. The UK uses Section 104 pooling (an average cost method). The US IRS requires FIFO as the default, with specific identification permitted if adequately documented. These differences mean that the same trading history produces different tax liabilities in different jurisdictions.

Staking, DeFi, and NFTs

The tax treatment of novel crypto activities remains unsettled. The US IRS issued guidance in 2023 (Revenue Ruling 2023-14) confirming that staking rewards are taxable as ordinary income at the time of receipt. DeFi activities — liquidity provision, yield farming, protocol fee distributions — remain largely without specific guidance, with practitioners applying general income and disposal principles. NFT transactions are generally treated as capital asset disposals, though the IRS has flagged certain NFT transactions as potentially constituting collectibles (taxed at a higher rate). These gaps create compliance uncertainty that dedicated crypto tax software providers (Koinly, TaxBit, CoinTracker) have built businesses around addressing.