From 2027, DeFi trading platforms in the US will have to report cryptocurrency transactions to the IRS.
On December 27, the US Internal Revenue Service (IRS) officially issued regulations requiring brokers in the digital asset field, including decentralized finance (DeFi) trading platforms, to report cryptocurrency transactions. The regulations are expected to take effect in 2027, marking a significant milestone in the oversight and tax management of the rapidly growing cryptocurrency market.
Specifically, starting in 2026, brokers will have to collect data, and from 2027, they will officially disclose information about the total amount of money earned from the sale of cryptocurrencies and other digital assets, as well as provide information related to the taxpayers involved in the transactions.
This means that the operations of DeFi platforms will become more transparent under the eyes of the tax authorities. The IRS estimates that the new regulations will affect about 2.6 million taxpayers and between 650 and 875 DeFi brokers.
Scope of application and objectives of the regulations
A notable point of the above regulations is the scope of application. The IRS clarified that only "trading front-end service providers" in the DeFi field will be considered brokers and must comply with the reporting requirements. This means that not all DeFi applications will be directly affected, but the focus is on platforms that provide trading interfaces for users.
According to the regulations, platforms that perform an intermediary function in digital asset transactions, including individual groups that support transactions "whether or not they operate through a legal entity", will be considered. If a DeFi platform is involved in supporting the buying and selling of digital assets, even through smart contracts, and has significant control or influence over the transaction process, that platform may be classified as a broker under the IRS definition.
The IRS states that the purpose of the regulations is not to target the DeFi industry, but to establish a level playing field, applying similar regulations that have been in place for traditional brokers for over 40 years.
The agency believes that reporting information from DeFi brokers will help improve tax compliance, especially for taxpayers who conduct cryptocurrency transactions without going through a custodial broker. This will give both the IRS and taxpayers a clearer picture of income from digital asset transactions.
The IRS rejects the view that the above regulations show bias against the DeFi industry or will hinder the development of this technology. The agency believes that providing transparent information about the total amount of money earned, similar to what custodial brokers are currently doing, will benefit users.
