What Happened?
The IRS is introducing new regulations that will require detailed wallet-by-wallet cost basis tracking for crypto assets starting January 1, 2026. This change mandates platforms like Coinbase and Kraken to issue 1099-DA forms for digital asset transactions, which will include information such as the type of asset, date of sale, and proceeds from the transaction. Previously, traders used a pooled basis for tax reporting, but now they need to keep precise records for each wallet.
Who Does This Affect?
This new regulation mainly affects US-based cryptocurrency traders and investors, particularly those who use multiple wallets and platforms for their transactions. Retail investors and institutional traders will have to adapt to these changes by ensuring they maintain accurate records of all their crypto transactions. The new rules also impact crypto exchanges as they will need to comply with new reporting standards and issue the required tax documents to their users.
Why Does This Matter?
The introduction of these IRS regulations has significant market implications, potentially slowing down trading activity due to increased compliance costs. Traders may need to adjust their strategies, considering the added burden of maintaining detailed records. Additionally, the increased transparency and regulatory compliance could instill more confidence in the cryptocurrency market, attracting more long-term investments but possibly reducing short-term speculative trading activity.