Introduction
According to the official website of the US government, the Internal Revenue Service (IRS) submitted a proposal to the White House in November, suggesting the adoption of an international standard for reporting and taxing digital assets. The White House is currently reviewing this proposal. This proposal, entitled "Broker Digital Transaction Reporting," was submitted to the White House on November 14. Its core content is to implement the "Crypto-Asset Reporting Framework" (CARF). Once in effect, the IRS will be able to obtain information on US taxpayers' cryptocurrency transactions on overseas exchanges and foreign platforms.
This move is particularly intriguing given the context of the Trump administration's return to the White House.
3.2 Second Phase: Implementation of Form 1099-DA (2024-2025)
After completing the authorization at the legislative level, the IRS promoted Form 1099-DA as the standardized carrier for digital asset transaction reporting, anchoring the applicable starting point to relevant transactions occurring after January 1, 2025. This move aims to elevate the reporting process for digital asset transactions to the same level of standardization as traditional securities transactions. Specifically, US domestic exchanges (such as Coinbase and Kraken) are now required to generate a 1099-DA form for each user, detailing the cost basis, acquisition date, sale date, and capital gains for each transaction; this measure also created enormous pressure on the industry to clean up historical data, forcing exchanges to complete large-scale user KYC supplementation and historical data correction work between 2024 and 2025.
For accounts unable to provide complete tax information, exchanges have taken measures such as freezing or implementing mandatory withholding taxes to ensure the tightness of the domestic tax compliance network. 3.3 Phase Three: Global Regulation and Offshore Compliance (2025 to Present) Since the passage and implementation of the Foreign Account Tax Compliance Act (FATCA) in 2010, the United States has been able to obtain information on the overseas financial accounts of U.S. tax residents through the global financial institution reporting system; however, for a considerable period of time, cryptocurrency trading platforms—especially overseas exchanges and offshore service providers—have not been fully incorporated into this cross-border information disclosure network. As domestic digital asset tax reporting systems (represented by rules such as 1099-DA) gradually enter the implementation stage and the compliant channels for the financialization of crypto assets (such as spot ETFs) open, the structural gaps in the regulatory field increasingly focus on the offshore market: if transaction information from overseas platforms cannot be systematically obtained, tax administration will be difficult to form a closed loop, which constitutes the real background for the recent White House review of related proposals. In 2024, the Treasury Department/IRS finally released and promoted the final rules for digital asset broker information reporting (the 1099-DA system), laying the foundation for domestic data collection; subsequently, in 2025, relevant departments submitted proposed rules for aligning with OECD CARF to the White House for review, indicating that the United States has begun to explore incorporating cross-border information exchange mechanisms into its digital asset administration toolbox. 3.4 The Formation of the Regulatory Puzzle: From Strict Enforcement to a Combination of Guidance and Control It is worth mentioning that, after the gradual completion of the tax collection and management system, simply describing it as "tightening tax supervision" is insufficient to summarize the overall landscape of US crypto governance. A more accurate observation is that US regulation is gradually transitioning from an early, highly fragmented model primarily based on case-by-case enforcement to a more comprehensive governance approach. On the one hand, it opens institutionalized channels for compliant financialization and institutional participation; on the other hand, it continuously raises the cost of violations and tax base transparency through reporting, enforcement, and information mechanisms. This "combination of guidance and control" structure is key to understanding the divergence in policy signals since 2024. Following the FTX incident, SEC Chairman Gary Gensler's enforcement-as-regulation strategy reached its peak in 2023, with a series of lawsuits against Coinbase, Binance, and others, leaving the industry treading on thin ice. However, in 2024, the landscape underwent a significant shift. That year, the U.S. Securities and Exchange Commission approved spot Bitcoin ETFs (January) and spot Ethereum ETFs (May), formally recognizing crypto assets as a "legitimate" asset class and opening the door for compliant entry of traditional capital. Simultaneously, Congress took proactive legislative action, with the 21st Century Financial Innovation and Technology Act (FIT21) passing the House of Representatives with a bipartisan majority (May), attempting for the first time to establish a clear regulatory framework and explicitly define the jurisdiction of the SEC and CFTC. Furthermore, subsequent regulatory adjustments in 2025 (SAB 122) alleviated, to some extent, the accounting barriers for banks entering businesses such as crypto custody. Based on the analysis of the aforementioned policy events, the US regulatory landscape is shifting from a single-leadership enforcement model by the Securities and Exchange Commission (SEC) to a collaborative system comprised of congressional legislation, prudential oversight by the SEC and CFTC, and anti-money laundering and tax compliance responsibilities by the Treasury Department and the Internal Revenue Service (IRS). This shift reflects a more mature and balanced regulatory approach: on the one hand, providing development channels for compliant assets (such as ETFs), and on the other hand, strengthening control over tax evasion and other illegal activities (such as crypto assets targeted by CARF). The SEC's move towards greater flexibility aims to keep innovative activities within the US, while the IRS's increased regulatory力度 ensures that the resulting wealth is included in the US tax base. 4. Industry Impact and Future Outlook: Finding a New Balance in an Era of Transparency Clearer global regulation and tax compliance are inevitable trends. The United States' continuous strengthening of offshore enforcement will have a profound impact on all participants in the crypto asset industry: the "ostrich mentality" is no longer effective, and a new era of compliance has arrived. 4.1 For Virtual Currency Trading Platforms/Brokerage Service Providers In the US context, the core lever for platform compliance is the domestic "Digital Asset Broker Reporting" system (represented by Form 1099-DA). For platforms targeting U.S. clients or those with reporting obligations in the U.S., they need to collect client identification information, aggregate transaction information, and generate reports in accordance with broker reporting rules, and simultaneously improve data governance related to client tax information (such as TINs) and cost bases (some elements have transitional arrangements). If the U.S. agenda for aligning with CARF rules continues to advance, platforms with a high proportion of cross-border business will further align their compliance focus with cross-border reporting, potentially triggering stricter data standardization, reconciliation record keeping, and the development of cross-border reporting capabilities. Overall, this will significantly increase platforms' investment in data governance and compliance, but it will also enhance their sustainable operating capabilities in institutional clients, bank partnerships, and the compliance market. 4.2 For Individual Investors With the implementation of domestic broker reports, more transaction data will enter the IRS information system through mechanisms such as 1099-DA, reducing the space for individual underreporting. If cross-border information exchange mechanisms are further strengthened in the future (including CARF integration), the availability of information on overseas platforms and offshore accounts will increase, and the pressure to explain historical transactions and capital chains will also rise. For investors, the real risk is often not an increase in future tax burden, but rather the potential for back taxes, penalties, and compliance disputes due to insufficient consistency in past year reports and inadequate cost basis restoration capabilities. 4.3 Obligations of Crypto Asset Custodians The boundaries of a custodian's obligations depend on whether it provides only simple custody services or brokerage services such as trade execution, matching, and exchange. If it only provides services such as safekeeping, wallet management, and custody reporting, its compliance pressure is more reflected in customer due diligence, asset segregation, security controls, and cooperation requirements with banks. However, if custody and trade execution are deeply integrated, it is more likely to be included in the brokerage reporting and related tax information declaration framework, requiring the establishment of more complete capabilities for collecting customer tax information, summarizing transaction data, and producing reports. In terms of trends, the evolution of the US system will force custodians to more clearly define their business lines and roles, reducing the gray area of nominal custody but actual matching. 4.4 Banks and Traditional Financial Intermediaries While tax reporting obligations primarily fall on brokerage platforms and service providers, banks and traditional financial intermediaries will also be passively drawn into this ecosystem. When providing fiat currency deposits and withdrawals, settlement, custody, or credit services to crypto platforms, banks will pay more attention to the platform's customer due diligence, transaction traceability, tax information compliance, and exposure to sanctions/anti-money laundering risks. They may also make auditability, the ability to provide compliant reports, and cooperation with tax/regulatory investigations prerequisites for cooperation. For wealth management, family office, and other businesses, crypto assets will also be more systematically incorporated into overall tax compliance and cross-border reporting planning, prompting institutional clients to shift from post-investment remediation to pre-transaction compliance design. 5. Response Strategy: From Observation to Proactive Compliance Given that the US's integration with the OECD CARF is still in the review process, and the specific scope of application and technical standards are not yet fully clear, a more feasible path for market entities is to: use the domestic broker reporting system (1099-DA, etc.) as a benchmark, and refer to the common practices of FATCA/CRS and other jurisdictions in promoting CARF, to complete data governance and process transformation in advance, reserving interfaces for possible future cross-border integration. Specifically, for trading platforms and brokerage service providers, they should assess as early as possible whether they fall within the scope of brokers/reporting obligations, prioritizing alignment with the 1099-DA requirements for customer information collection and transaction data aggregation; they should supplement key fields such as TIN and tax residency status in the KYC process, establish auditable data traceability and reporting capabilities, and reserve mapping interfaces compatible with international data structures to reduce the subsequent cost of rule implementation. For individual investors, the key is not the trading platform, but whether transaction records and cost bases are reproducible, explainable, and consistent with reporting standards. It is recommended to collect cross-platform/cross-chain transaction records as early as possible, retaining cost, fee, and consideration vouchers. For investors with transactions on overseas platforms or offshore accounts, it is advisable to assess the consistency of past year reports and potential supplementary reporting needs in advance to avoid reactive responses once information availability improves. For custodian institutions and infrastructure service providers, the boundaries of obligations should be defined according to the substance of the business: pure custody should focus on security, segregation, and auditable records; if custody is coupled with brokerage services such as matching/execution/exchange, then the ability to conduct tax due diligence and data reporting for clients should be improved in accordance with platform standards. Even if the detailed rules are not yet finalized, the ability to retain transaction data, reconcile accounts, and generate reports should be prepared for future review. Conclusion The White House's assessment of the proposal is not merely an isolated executive order, but a reaffirmation of national sovereignty over financial boundaries in the digital economy era. For practitioners, this presents both challenges and tremendous opportunities. Traditional tax avoidance strategies will no longer be viable, replaced by sophisticated tax planning and automated compliant reporting. In this new era, transparency and compliance are inevitable. As Benjamin Franklin said, "Nothing in this world is certain except death and taxes." In the world of Web3, this statement should perhaps be accompanied by a footnote: "Even on decentralized blockchains, taxes will ultimately remain a constant presence."
Weatherly
Catherine
Anais
Kikyo