The United States Internal Revenue Service (IRS) has issued final regulations requiring broker-dealers to report digital asset transactions, integrating decentralized finance (DeFi) platforms into existing tax frameworks.
The rules, which are expected to take effect in 2027, will require brokers to disclose transaction details, including gross proceeds and taxpayer information.
The regulations primarily target “commercial front-end service providers,” such as decentralized exchanges (DEXs), which facilitate digital asset transactions. According to the IRS, these platforms play an intermediary role and their classification as a broker-dealer will help ensure tax compliance.
Under the new rules, platforms offering the exchange or sale of digital assets, even through smart contracts, can be considered brokers if they exercise sufficient control over the transactions. This definition is consistent with the IRS’s long-standing approach to brokers, which it says has been in place for more than 40 years.
The IRS clarified that the regulations focus on front-end tax information and reporting platforms, stating: “The only DeFi participants that are treated as broker-dealers (…) are commercial front-end service providers.
The rules do not encompass all DeFi applications or their varying degrees of decentralization, limiting their scope to platforms that actively facilitate transactions for customers.
The regulations will apply to digital asset transactions starting in 2027, with brokers required to begin collecting and reporting data in 2026. The IRS estimates that between 650 and 875 DeFi brokers will be affected, which could impacting up to 2.6 million taxpayers.
The IRS argues that these measures are consistent with existing broker-dealer regulations and are not intended to discriminate against the DeFi sector.
“Reporting information by DeFi brokers under Section 6045 will result in higher levels of taxpayer compliance,” the IRS said.
However, classifying DeFi frontends as brokers could challenge platforms that operate in a decentralized manner.
Basically, the IRS still considers crypto assets to be property rather than currency for income tax purposes, just as its regulatory guidance was issued seven years ago. This means that the authority will continue to tax crypto profits and losses like those of stocks, at capital gains rates.
The IRS has also studied how to track fair market value, capital gains and losses in the context of virtual currencies. When a transaction is facilitated by a cryptocurrency exchange, the taxed transaction value is the amount that was recorded by the platform in US dollars. Additionally, the taxpayer’s purchase/sale price will determine whether a gain or loss occurred and its duration.
