The Granularity Revolution in Digital Asset Taxation: Analysis and Compliance Guide for U.S. 1099-DA Form

Author: FinTax

1 Introduction

As crypto assets move from the fringe to the mainstream, the “Sky Net” of global tax regulation is accelerating its weave. Following the official release of the 2025 Digital Asset Broker Information Reporting Form (Form 1099-DA,简称1099-DA) and its accompanying guidance, the IRS has recently updated two detailed rules. This move not only clarifies the mandatory reporting obligations of digital asset brokers but also refines the exemption thresholds for de minimis transactions through supplementary rules. Additionally, it innovatively offers optional reporting methods for stablecoins and designated NFTs. This is more than just a form update; it demonstrates that regulatory granularity has been refined to the level of individual tokens. While ensuring tax transparency, regulators are reducing compliance costs for market participants through differentiated rules. This article will analyze the recent updates to Form 1099-DA, explore the IRS’s current regulatory trends and core implications, and provide compliance references.

2 Tracing the Roots: Content and Background of Form 1099-DA

2.1 Overview

Form 1099-DA is a reporting form used by digital asset brokers to report gains and losses from digital asset transactions to the IRS and clients. 1099-DA is not a patch for existing systems but a dedicated reporting form designed specifically for the native properties of digital assets.

According to the latest instructions for Form 1099-DA (Instructions for Form 1099-DA (2025)), starting January 1, 2025, brokers must record and report the gross proceeds of each transaction. Notably, the IRS will not require mandatory reporting of cost basis and gain/loss characteristics in 2025; instead, it grants a voluntary reporting grace period, explicitly stating that no penalties will be imposed for reporting errors during this period. The mandatory reporting of cost basis and gain/loss details will be deferred until 2026 (for “covered digital assets” acquired after January 1, 2026), providing a one-year transitional period for brokers to address historical issues such as on-chain asset ownership verification and cost tracing.

Furthermore, the latest guidance on 1099-DA demands more granular data reporting, focusing on two dimensions: first, asset identity “uniqueness,” achieved by introducing standardized Digital Token Identifier Foundation (DTIF) codes to eliminate ambiguity in token naming; second, transaction nature “structuring,” by isolating specific asset flows to distinguish primary sales (original minting proceeds) from investor transfer gains/losses. Specifically, the IRS added Box 11c to separately report the original minting proceeds of designated NFTs (Non-fungible Tokens) from secondary market transfers, enabling more detailed reporting data.

Digital Assets: According to 1099-DA, digital assets refer to any value expressed in digital form recorded on cryptographically secured distributed ledgers (such as blockchains or similar technologies), regardless of whether each transaction is recorded on the ledger; they do not include cash (i.e., USD or any other fiat currency issued by governments or central banks). The IRS’s definition is broad, covering any digitally recorded value on cryptographically protected distributed ledgers, including cryptocurrencies, tokenized securities, and designated NFTs.

Qualifying Stablecoins: Digital assets that meet all three of the following criteria are considered qualifying stablecoins:

(1) Designed to track, on a 1:1 basis, a single fiat currency issued by a government or central bank (including USD);

(2) Use effective stabilization mechanisms;

(3) Widely accepted as a means of payment by entities other than the issuer.

Reporting Entities: The 1099-DA mainly targets brokers and digital asset intermediaries.

Brokers: As revised under the regulations implementing Section 6045 of the Internal Revenue Code, a broker refers to any person who is regularly prepared to execute digital asset sales on behalf of others. For digital asset sales, a person is considered a broker if:

(1) They regularly suggest clients redeem digital assets they have created or issued; or

(2) They act as an agent, dealer, or intermediary executing client digital asset dispositions.

Digital Asset Middleman: Provides facilitation services for digital asset sales and can identify the seller’s identity and transaction nature.

Such middlemen include:

(1) Entities accepting or processing digital assets as payment for stocks, commodities, regulated futures contracts, securities futures, forward contracts, foreign currency contracts, debt instruments, options, or securities futures;

(2) Real estate reporting agents who know or should know that the buyer uses digital assets for payment;

(3) Entities accepting digital assets as compensation for brokerage services;

(4) Owners or operators of one or more digital asset vending machines; or

(5) Digital Asset Payment Processors (PDAP).

Entities that do not qualify as middlemen include:

(1) Those solely engaged in proof-of-work (PoW) or proof-of-stake (PoS) distributed ledger validation services (staking/mining) without other functions; or

(2) Those providing hardware or software (via sale, licensing, or other means) that allows users to control private keys to access digital assets on distributed ledgers (e.g., non-custodial wallets), without additional services.

In summary, digital asset middlemen include not only traditional centralized exchanges (CEXs) but also custody wallet providers, payment processors (PDAP), and operators of digital asset vending machines (kiosks).

To intuitively understand the uniqueness of 1099-DA, the following table compares it with traditional financial and payment reporting forms.

2.2 Core Content

The structure of 1099-DA parallels the traditional 1099-B for securities but adds several detailed fields tailored for crypto features:

Box 1a & 1b (Digital Asset Code and Name): Mandatory inclusion of DTIF codes; if a token lacks a DTIF code, “999999999” (alphanumeric identifier) must be used. For optional reporting of designated NFTs, Box 1a also requires “999999999,” and Box 1b should specify “Specified NFTs.” For optional reporting of qualifying stablecoins, Box 1a should contain the stablecoin’s DTIF identifier, and Box 1b the stablecoin’s name.

Box 1f (Gross Proceeds): Can include cash, fair value of services, digital assets, or other property received.

Box 1g (Cost Basis): Voluntary in 2025 but will become central for profit/loss calculations in the future.

Box 11a & 11b (Aggregate Reporting Flags): Special pathways for stablecoins and designated NFTs, indicating whether optional reporting methods are used and the number of transactions covered.

Box 11c (Primary Market Sales): Specifically captures the original minting proceeds of designated NFTs, distinguishing them from secondary market transfers.

2.3 Background of Form 1099-DA

2.3.1 Domestic (U.S.)

In August 2021, the Infrastructure Investment and Jobs Act (IIJA) was passed by the Senate and signed into law in November of the same year. It amended Section 6045 of the Internal Revenue Code, explicitly including “digital assets” within the legal definition of “broker” for reporting purposes, aiming to improve tax transparency through third-party automatic reporting.

After two years of professional consultation and public policy discussions, on July 9, 2024, the U.S. Treasury and IRS officially issued Treasury Decision 10000 (TD 10000), titled “Gross Proceeds and Basis Reporting by Brokers and Determination of Amount Realized and Basis for Digital Asset Transactions.” Effective September 9, 2024, TD 10000 precisely defines broker criteria, specifies reportable transaction types, and details cost basis calculation methods.

TD 10000 states that 1099-DA will be implemented starting in 2026, with each field supported by legal provisions from TD 10000, requiring brokers to report digital asset gains and cost basis information from January 1, 2025.

2.3.2 International (Overseas)

Notably, the issuance of 1099-DA is not only a unilateral domestic regulatory upgrade but also aligns with the global trend toward tax transparency. At the end of 2022, the OECD released the Crypto-Asset Reporting Framework (CARF), aiming to establish a global standard for automatic exchange of crypto tax information. On November 10, 2023, the U.S. and over 40 countries issued a joint statement committing to accelerate CARF implementation. On July 30, 2025, the U.S. proposed a digital asset disclosure report to implement CARF. On November 14, 2025, the IRS submitted a proposal titled “US Broker Digital Transaction Reporting” to the White House, seeking to implement CARF. The White House is currently reviewing this proposal. If the U.S. adopts CARF, it will enable the IRS to access key information on overseas crypto accounts of U.S. taxpayers and conduct tax enforcement accordingly.

Although the U.S. has not yet signed a multilateral CARF agreement or initiated automatic exchange of crypto tax data with other jurisdictions, the formal rollout of 1099-DA marks the first step in building a mature underlying data collection system, laying the technical foundation for future international tax data exchanges.

3 Riding the Trend: Recent Policy Interpretations of U.S. 1099-DA

Recently, the IRS has accelerated its regulation of crypto assets. The new detailed rules show that its policy output is no longer limited to macro compliance but has evolved into concrete standards with enforcement capability and efficiency.

3.1 De Minimis Exemptions and Summary Reporting Rules

While maintaining strict oversight, the IRS demonstrates flexibility through de minimis rules and optional reporting methods layered to form a burden-reduction system, avoiding regulatory redundancy.

Specifically, brokers first determine whether a transaction qualifies for the “optional reporting method” based on asset type. Once the optional method is chosen, the IRS assigns a “de minimis threshold.” Only transactions exceeding this threshold need to be reported under the optional method; otherwise, they are exempt.

The optional reporting method determines “how to report”: for low-volatility stablecoins (Qualifying Stablecoins) and designated NFTs with consumer attributes, brokers can simplify or skip detailed transaction reporting and instead use aggregate reporting if conditions are met.

The de minimis exemption determines “whether to report”: to prevent overwhelming the tax system with small retail transactions (e.g., buying coffee or small daily payments with crypto), the IRS sets different thresholds:

Digital Asset Payment Processors (PDAP) sales threshold: $600

If a PDAP processes total payments or transactions for the same client not exceeding $600 in a year, no 1099-DA is required.

Qualifying Stablecoins optional reporting threshold: $10,000

For stablecoins using the optional reporting method, if the client’s total annual sales (net of transaction costs) do not exceed $10,000, the broker can omit reporting.

Designated NFTs optional reporting threshold: $600

For designated NFTs, if the client’s total annual sales (net of transaction costs) do not exceed $600, the broker can omit reporting.

3.2 Exclusion from Joint Filing Programs

Another recent development is that the IRS explicitly states that the 1099-DA for the 2025 tax year will not participate in the “Federal/State Joint Filing Program (CF/SF).” This means brokers cannot submit state tax data through a single federal system and may need to report separately to local tax authorities according to each jurisdiction’s laws.

4 Conclusion

Faced with the multiple challenges brought by 1099-DA, high-net-worth investors, project teams, and Web3 institutions must adapt to new reporting rules. For Web3 practitioners, transaction data governance is not only about complying with IRS reporting and audits but also about refining their own clear financial picture. In the wave of transparency regulation, those who can upgrade from “chaotic accounts” to “tax compliance” first will gain long-term certainty in the increasingly competitive global Web3 landscape.