TL;DR
The 2025 USA crypto tax season brings major regulatory changes that impact everyone—from individual investors to institutions. In this exclusive interview, Kryptos CEO Sukesh Tedla explains how crypto is taxed in the U.S., the implications of new IRS requirements, and clears up common misconceptions. He also discusses the latest global regulations (CARF, DAC8, and Safe Harbor), DeFi taxation, challenges for crypto businesses, and how Kryptos provides an automated solution to simplify compliance.
Introduction
With the rapid evolution of cryptocurrency, U.S. tax laws are also adapting to keep pace. The IRS has introduced significant changes for 2024-2025, including new wallet-by-wallet reporting requirements, designed to enhance transparency in crypto tax reporting. Additionally, Safe Harbor provisions are being implemented to assist taxpayers in adjusting to these changes. While these updates bring clarity and uniformity, they also create new challenges for investors, traders, and businesses alike.
To break down these changes, Kryptos CEO Sukesh Tedla shares exclusive insights into the 2025 crypto tax season, explaining the impact of new regulations, how exchanges report data to the IRS, and the role of automated tax solutions in ensuring seamless compliance.
Can you explain how cryptocurrency is taxed in the U.S. and what major changes investors should expect in 2025?
Thank you for having me. Cryptocurrency in the U.S. is treated as property for tax purposes, meaning that every sale, trade, or even spending of crypto is considered a taxable event. The tax is calculated based on the difference between the purchase price (cost basis) and the sale price (fair market value at disposal).
For 2025, the biggest change is the new wallet-by-wallet reporting rule, meaning that cost-basis tracking must be done on a per-wallet basis rather than at a universal level. Previously, investors could consolidate data from multiple wallets, but now, each wallet must have separate and detailed records. This makes it essential for crypto users to maintain accurate transaction logs for each account.
Additionally, Form 1099-DA will soon require exchanges and brokers to report cost basis details, but it remains relevant only for exchanges and not for DeFi platforms at this time. This ensures the IRS has a clearer view of every investor’s crypto activity, making compliance more critical than ever.
How do exchanges report crypto transactions to the IRS? Are all exchanges required to share this data?
Yes, under the new IRS guidelines, exchanges and brokers are required to report detailed crypto transactions. Platforms already issue forms like 1099-B, and with Form 1099-DA, they will now report sale amounts, acquisition dates, and cost basis directly to the IRS. This means that the IRS will cross-check investors’ self-reported tax data with exchange reports.
One common misconception is that crypto transactions are private and untraceable. While blockchain transactions are decentralized, they are publicly recorded, and tax authorities have advanced blockchain analytics tools to track crypto movements. Therefore, maintaining accurate and self-reported records is crucial to ensure compliance and prevent IRS scrutiny.
What are some of the most common myths about crypto taxation in the U.S., and what is the reality?
There are several misconceptions, but here are the most common ones:
- Crypto is anonymous and untaxed – Many believe that because crypto transactions occur on decentralized networks, they are not taxable. In reality, blockchain transactions are public and traceable, and the IRS has the tools to monitor them.
- Only cashing out to fiat is taxable – Many assume that taxes apply only when converting crypto to USD. However, trading one cryptocurrency for another (e.g., ETH to BTC) also triggers a taxable event.
- Crypto staking and airdrops are not taxable – The IRS has clarified that receiving staking rewards or airdrops is considered ordinary income, taxable at the fair market value at the time of receipt.
These misconceptions can lead to significant tax liabilities if investors do not report their transactions properly.
What are the latest regulatory updates affecting crypto taxation? Can you touch on CARF, DAC8, Safe Harbor, and recent IRS initiatives?
Certainly. Several new regulations are shaping the crypto tax landscape:
- CARF (Crypto Asset Reporting Framework): A global initiative aimed at standardizing cross-border crypto tax reporting to enhance transparency.
- DAC8 (EU’s Digital Assets Tax Directive): A European regulation requiring digital platforms to report user transactions—it impacts U.S. investors trading on global platforms.
- Safe Harbor Provisions: The U.S. has introduced transitional rules to help investors adjust to the new wallet-by-wallet reporting, reducing penalties for minor errors.
- IRS Initiatives: The IRS is expanding Form 1099-DA reporting and improving enforcement efforts to ensure tax compliance among crypto holders. Additionally, a potential new law from 2027 may require DeFi platforms to report transactions using 1099-DA forms.
How is DeFi taxed, and what should users be aware of?
Decentralized finance (DeFi) presents complex tax challenges because many activities trigger taxable events. Key points include:
- Providing liquidity to DeFi pools is often considered a trade and may create a taxable event.
- Yield farming and staking rewards are taxed as ordinary income upon receipt.
- Wrapped tokens and synthetic assets can lead to capital gains or losses depending on the transaction type.
Tracking all these activities manually is nearly impossible, which is why automated tax solutions like Kryptos are essential to ensuring compliance.
Crypto businesses face many financial challenges. What are the biggest tax-related issues they encounter?
Crypto businesses struggle with:
- High transaction volumes across multiple wallets and exchanges.
- Data fragmentation due to lack of standardized reporting.
- Accounting complexities in calculating cost basis and capital gains.
- Regulatory uncertainty, as rules change frequently.
Manual tracking leads to inaccuracies and compliance risks. Businesses need advanced tax automation to aggregate, calculate, and report taxes efficiently.
How is Kryptos addressing these challenges, and what makes it unique?
Kryptos is a comprehensive, automated crypto tax platform that integrates with 5,000+ exchanges, wallets, and DeFi platforms. It simplifies tax reporting by:
- Automating cost basis calculations using methods like FIFO, LIFO, and HIFO.
- Tracking all transactions in real time, reducing manual errors.
- Generating IRS-ready reports, ensuring full compliance with Form 1099-DA and other regulations.
We make crypto tax reporting stress-free, accurate, and fully compliant for both individuals and enterprises.
Conclusion
The 2025 U.S. crypto tax season introduces stricter reporting requirements, new regulatory frameworks, and more enforcement from the IRS. Investors must adapt to wallet-by-wallet tracking, comply with Form 1099-DA, and understand global reporting standards like CARF and DAC8.
With automation, real-time tracking, and IRS-compliant reports, Kryptos simplifies the crypto tax process, helping investors stay ahead of regulatory changes while optimizing their tax strategy.
Take control of your crypto taxes today—let Kryptos do the heavy lifting.
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