Digital Asset Broker Reporting: Who Must File Form 1099-DA

A brokerage that custodies digital assets for customers now has to treat those sales the way a stock brokerage treats an equity trade: track the proceeds, match them to a customer, and send a form to both the customer and the IRS. That single shift, phased in since the 2024 final regulations under Internal Revenue Code Section 6045, has quietly rewritten the back-office requirements for every centralized exchange, hosted wallet provider, and crypto-accepting payment processor operating in the United States. The rules are no longer theoretical. Tax year 2025 sales are the first to appear on the new Form 1099-DA, and the forms covering those sales started landing in customer inboxes and IRS systems in early 2026.

This guide walks through who actually counts as a broker under the final rules, what has to be reported and when, how the now-repealed DeFi broker rule changed the landscape, and how a platform (or a trader trying to anticipate what a platform will send) should build a compliance decision around it. It is written for compliance leads, controllers at exchanges and payment platforms, and finance teams at companies that accept or hold digital assets on behalf of others.

Do You Need to Treat Your Platform as a Digital Asset Broker in 2026?

The regulatory definition of “broker” under Section 6045, as finalized by Treasury in mid-2024 and refined by subsequent notices, hinges on one question above all others: does the platform ever stand between the buyer and seller in a way that lets it know the identity of the customer and the details of the transaction? If the answer is yes, and the platform also has the ability to take custody of the asset being sold, it is very likely a broker for reporting purposes, regardless of what the company calls itself in its marketing.

Use this sequence to work through the determination rather than guessing from a competitor’s compliance page, since the categories genuinely do get applied differently depending on the business model:

1. Does your platform ever hold customer private keys, custodial balances, or the equivalent control over digital assets during a transaction? If no — the software only routes a transaction between two on-chain addresses without your firm holding the keys at any point — you are very likely outside the reporting mandate following the 2025 repeal of the DeFi broker rule.
2. Does your platform set or facilitate the price, match buyers to sellers, or process the transfer of value? Custodial exchanges, many payment processors that convert crypto to fiat at checkout, and kiosk operators (crypto ATMs) satisfy this test almost by definition.
3. Is the transaction a sale or exchange for consideration, rather than a transfer between a customer’s own wallets? Only dispositions trigger 1099-DA reporting. Moving assets from a customer’s exchange account to their own hardware wallet is not, by itself, a reportable sale, though transfer statement rules require the sending broker to pass basis information to the receiving broker when both are custodial.
4. Is your platform a “digital asset payment processor” facilitating merchant acceptance of crypto? These entities were given a narrower, phased set of obligations under Treasury guidance issued alongside the final rules, and in many structures the merchant’s payment processor — not the merchant — carries the reporting duty.

A platform that clears all four checkpoints needs a reporting build-out well before its next tax year closes. A platform that clears none of them — a pure non-custodial protocol front-end, a wallet app that never takes custody, or a piece of infrastructure tooling with no visibility into counterparties — is not a broker under current law, though that could change again if Congress revisits the question.

Evaluation Criteria: What Actually Determines Broker Status and Reporting Scope

Custody, Not Just Facilitation

Custody is the load-bearing concept in the whole framework. A centralized exchange that holds customer balances in omnibus wallets is squarely a broker. A decentralized exchange protocol where trades settle directly between the two parties’ own wallets, with the front-end interface never taking possession of funds, is not — a distinction Congress affirmed when it voted to nullify the separate DeFi-specific broker regulation (T.D. 10021) via House Joint Resolution 25, signed into law in April 2025. That repeal removed an entirely separate compliance track that would have swept in “trading front-end services,” and it means the custody test now does almost all of the analytical work.

Transaction Visibility

A broker needs enough visibility into a transaction to identify the customer, the asset, the date, and the proceeds. Kiosk operators (the companies running crypto ATMs) and certain payment processors sit in an interesting middle ground here — they clearly have visibility and often custody for a brief window, but the final rules and subsequent Treasury notices gave them a narrower, later-starting set of obligations than full exchanges, recognizing that ATM operators often lack the ongoing account relationship that exchanges have with customers.

Asset Type Coverage

The reporting rules apply broadly to digital assets as defined for tax purposes — cryptocurrency, most stablecoins, and NFTs are all in scope for gross proceeds reporting. Tokenized real-world assets, including tokenized Treasury products and tokenized funds, generally fall under the same digital asset umbrella when they are recorded on a cryptographically secured distributed ledger, even though the underlying economic exposure looks identical to a traditional security. Firms running tokenization platforms should not assume that “it’s really just a bond” exempts them from 1099-DA obligations if the wrapper is a digital asset and their platform custodies it during a sale.

Phase-In Timing

Reporting scope is not static across tax years. Gross-proceeds-only reporting began with sales in calendar year 2025. Cost basis gets layered on for sales starting in 2026. Full enforcement of backup withholding — the 24% withholding requirement that applies when a customer has not certified a valid taxpayer identification number — has been pushed back multiple times through IRS transitional relief notices, most recently extended into 2027 for custodial brokers effectuating digital asset sales. A compliance build that only accounts for the 2025 rules will be behind schedule by the time the 2026 tax year cost-basis requirements land.

Penalty Exposure

Failure to file a correct information return, or failure to furnish it to the payee, carries per-form penalties under IRC Sections 6721 and 6722 that scale with how late the correction comes and whether the failure was intentional. For platforms processing tens of thousands of customer accounts, an error rate that looks trivial as a percentage can translate into a meaningful aggregate penalty exposure, which is why the evaluation criteria above should feed directly into a documented, defensible determination rather than an informal judgment call.

Comparing Broker Categories Side by Side

The table below lines up the platform types compliance teams ask about most often against the four criteria that matter for a 1099-DA determination.

What Gets Reported, and When: The Phase-In at a Glance

The reporting build isn’t a single deadline — it’s three overlapping phases stacked on top of each other, and each one adds a layer of obligation without removing the last. The chart below shows the cumulative compliance load a custodial broker carries by tax year, expressed as a share of the fully phased-in requirement.

Two mechanics inside that phase-in trip up otherwise well-run compliance teams. First, gross proceeds reporting for 2025 sales does not require a basis figure at all — the form simply states what the customer received, leaving the customer to calculate their own basis and gain for that year’s return, the same posture equity brokers were in decades ago before basis reporting became standard. Second, the shift to basis reporting in 2026 only works cleanly if the broker actually captured acquisition data — cost, date, and units — for assets that moved onto the platform after January 1, 2026. Assets acquired earlier and only transferred in, or acquired on a different platform entirely, often carry basis the receiving broker cannot verify, which is exactly why the transfer statement requirement between brokers exists: it forces the sending platform to pass basis and holding-period data along when a customer moves assets from one custodial broker to another.

Worked Example: A Mid-Size Exchange Files a 1099-DA

Consider a hypothetical exchange, Meridian Digital, with 40,000 active US customers. One customer, Dana, bought 0.5 BTC on Meridian in March 2025 for $31,200 and sold the full position on Meridian in November 2025 for $46,500.

Because the sale happened in 2025, Meridian’s obligation for that transaction on the 1099-DA it issues in early 2026 is to report gross proceeds of $46,500, the transaction date, and enough asset identification detail (asset ticker/type and, per the finalized instructions, wallet or account identifiers) to let the IRS match the sale to Dana. Meridian does not need to report Dana’s $31,200 cost basis on the form for this transaction year — that field is not required for 2025 sales. Dana still needs that $31,200 figure to compute a $15,300 capital gain on Form 8949, and if Dana kept good records or pulled a transaction history from Meridian’s export tool, that’s straightforward. If Dana instead moved the BTC in from another exchange years earlier without documentation, reconstructing basis becomes the taxpayer’s problem, not Meridian’s, for a 2025 sale.

Now change the facts slightly: suppose Dana instead buys 0.5 BTC on Meridian in February 2026 and sells it on Meridian in September 2026. Because the purchase and the sale both happen on Meridian in 2026, cost basis reporting has kicked in, and Meridian’s 1099-DA for that transaction — issued in early 2027 — must include both the $31,200 basis and the $46,500 proceeds, arriving at the same $15,300 gain, but this time Meridian states it directly on the form the IRS also receives. If Dana had not certified a valid Form W-9 on file, Meridian would additionally be required to withhold 24% of the $46,500 gross proceeds as backup withholding under IRC Section 3406 and remit it to the IRS — though under the transitional relief the IRS has granted custodial brokers, many platforms are not yet being penalized for withholding shortfalls tied strictly to the digital asset provisions through the 2027 transition window, which is a compliance grace period, not a permanent exemption.

Common Mistakes Brokers and Traders Make Under the New Rules

Assuming “We’re Not a Bank” Means “We’re Not a Broker”

The Section 6045 broker definition borrows the word from securities law but applies its own custody-and-facilitation test to digital assets. A payment app, a rewards platform that lets users cash out crypto rewards, or a gaming platform with an in-app marketplace can all trip the broker definition even though none of them think of themselves as a financial institution.

Treating the DeFi Repeal as Blanket Immunity

The April 2025 repeal of the DeFi-specific broker rule removed a distinct regulatory track aimed at “trading front-end service providers.” It did not touch the underlying custodial broker rules. A team running a hybrid product — a slick DeFi-style interface sitting on top of a custodial backend that actually holds customer funds — is still squarely inside the reporting mandate. The repeal protects genuinely non-custodial software, not custodial platforms wearing a decentralized-looking skin.

Ignoring Transfer Statements Between Brokers

When a customer moves assets from Broker A to Broker B and both are custodial brokers, Broker A generally has to furnish a transfer statement carrying basis and acquisition-date information to Broker B. Platforms that built their 2025 compliance program only around outbound 1099-DA reporting and skipped the transfer statement plumbing will find themselves unable to report accurate basis in 2026 for assets their customers moved in from elsewhere.

Under-Scoping Kiosk and Payment Processor Obligations

Because kiosk operators and payment processors got narrower, later-starting rules than full exchanges, some smaller operators have assumed they are exempt entirely. The realistic reading of the guidance is “phased and limited,” not “excluded” — an ATM network processing meaningful volume should build toward full reporting rather than betting on permanent carve-out treatment.

Missing the Tokenized Security Overlap

Firms issuing or trading tokenized Treasuries, tokenized money market fund shares, or other blockchain-recorded securities sometimes assume existing broker-dealer 1099-B processes cover them and skip the digital-asset-specific analysis. Where the instrument is legally a digital asset on a cryptographically secured ledger, the 1099-DA framework can apply in addition to, or instead of, traditional 1099-B treatment depending on how the asset is classified, and getting that classification wrong creates duplicate or missing filings either way.

Waiting for a Final IRS Threshold That Isn’t Coming

Unlike the $600 de minimis threshold debates that dogged 1099-K reporting for payment platforms, there is no small-transaction exemption for digital asset broker reporting. A broker must report a customer’s digital asset sale regardless of how small the proceeds were. Teams sizing their reporting infrastructure around an assumed minimum-dollar cutoff are building for a rule that does not exist.

Practical Compliance Checklist for Digital Asset Brokers

• Document a written custody-and-facilitation determination for every product line, not just the flagship exchange, and revisit it whenever a new feature (staking, card cash-back in crypto, an embedded marketplace) launches.
• Confirm your transaction data model captures the fields Form 1099-DA instructions require: date acquired, date sold, gross proceeds, digital asset identifier, and — starting with 2026 sales — cost basis and holding period.
• Build or license transfer-statement infrastructure so inbound transfers from other custodial brokers arrive with usable basis data, and outbound transfers carry it forward.
• Collect and validate Form W-9 (or W-8 series for non-US persons) at onboarding, and re-verify TINs on file before the backup withholding transition relief narrows further.
• Separate kiosk, payment-processor, and core-exchange transaction flows in your reporting system, since each currently sits on a different phase-in timetable.
• Reconcile 1099-DA output against internal ledgers before the filing deadline each year — a mismatch discovered after filing triggers corrected-return obligations and potential 6721/6722 penalty exposure.
• Track IRS transitional relief notices specifically; the agency has moved backup withholding enforcement dates more than once, and a compliance calendar built on the original 2024 regulations alone is already out of date.
• If you operate internationally, map which of your jurisdictions have committed to the OECD’s Crypto-Asset Reporting Framework, since CARF exchange-of-information obligations run on a separate track from US 1099-DA rules and can apply even when a customer is a US person using a foreign-domiciled platform.
• Give customer support and tax-season messaging teams a plain-language explainer of what is and is not on the 1099-DA for the relevant tax year, since a form that reports proceeds but not basis routinely generates confused support tickets in the first filing seasons.

Firms building broader market-structure compliance programs alongside this reporting build-out should also track how digital asset registration and trading-venue rules are evolving more generally — our guide to the CLARITY Act and the new digital asset market structure regime covers how those venue-level rules interact with the same custody concepts driving broker reporting.

Key Takeaways

• Custody is the deciding factor: platforms that hold customer digital assets and facilitate sales are brokers; non-custodial protocols generally are not, following the 2025 repeal of the separate DeFi broker rule.
• Form 1099-DA reporting started with gross-proceeds-only data for 2025 sales, filed in early 2026, and adds cost basis for 2026 sales, filed in early 2027.
• There is no de minimis dollar threshold — every reportable sale counts, regardless of size.
• Backup withholding at 24% remains law, but the IRS has repeatedly extended transitional relief on enforcing it against custodial digital asset brokers, currently running through 2027.
• Kiosk operators and payment processors face real but narrower, later-phasing obligations — not a permanent exemption.
• Transfer statements between custodial brokers are the mechanism that keeps cost-basis reporting accurate when customers move assets between platforms; skipping that build creates basis gaps in 2026 and beyond.
• International platforms need a separate compliance track for the OECD’s Crypto-Asset Reporting Framework, which runs on its own multi-jurisdiction timeline distinct from US Treasury rules.

Frequently Asked Questions

What is Form 1099-DA and who has to send it?

Form 1099-DA is the IRS information return that custodial digital asset brokers use to report a customer’s gross proceeds from digital asset sales. Centralized exchanges, many hosted wallet providers, certain payment processors, and kiosk (crypto ATM) operators are required to send it when they facilitate a customer’s sale and had custody of the asset at some point in the transaction.

Do decentralized exchanges have to report transactions on Form 1099-DA?

Generally no. Congress repealed the separate rule that would have classified non-custodial DeFi trading front-ends as brokers when it passed House Joint Resolution 25 in April 2025. A decentralized exchange that never takes custody of a user’s assets is not currently subject to 1099-DA reporting, though a custodial platform using a decentralized-style interface on top of a custodial backend still is.

When does cost basis reporting start for digital asset brokers?

Cost basis reporting begins with digital asset sales occurring in tax year 2026, which brokers report on forms issued in early 2027. Sales in tax year 2025, reported in early 2026, only required gross proceeds reporting without a basis figure.

What happens if a customer does not provide a W-9 to a digital asset broker?

Without a valid, certified taxpayer identification number, a broker is generally required to apply 24% backup withholding on the gross proceeds of a customer’s digital asset sale under IRC Section 3406. The IRS has extended transitional relief on enforcing backup withholding penalties against custodial digital asset brokers through 2027, but the underlying withholding obligation itself remains in place.

Are crypto ATM operators treated as brokers?

Yes, kiosk operators running crypto ATMs are treated as brokers under the final regulations, but they were given narrower and later-starting reporting obligations than full custodial exchanges, including permission to use aggregate reporting methods during the initial phase-in rather than full per-transaction detail from day one.

How does the OECD’s CARF differ from US Form 1099-DA reporting?

The Crypto-Asset Reporting Framework is a multilateral information-exchange standard that dozens of jurisdictions have committed to implement, feeding tax authorities cross-border data on crypto-asset holdings and transactions much like the existing Common Reporting Standard does for bank accounts. It runs on a separate legal basis and timeline from US Form 1099-DA rules, and a platform operating internationally may owe reporting under both frameworks simultaneously for the same underlying activity.

References

• Internal Revenue Service, “Final regulations and related IRS guidance for reporting by brokers on sales and exchanges of digital assets.”
• Internal Revenue Service, Notice 2025-33, extended transitional relief for digital asset information reporting and backup withholding by brokers.
• U.S. Congress, House Joint Resolution 25 (119th Congress), disapproving the Treasury/IRS rule on gross proceeds reporting by custodial brokers for digital asset trading front-end services.
• Internal Revenue Service, Instructions for Form 1099-DA.
• OECD, “Crypto-Asset Reporting Framework: Monitoring and Implementation Update.”