Global Crypto Tax Information Reporting – Where are we now, and what lies ahead?

Tax reporting grows

The introduction of global tax information reporting frameworks on the crypto industry will be a seismic shake-up for brokers that take possession of digital assets on behalf of customers (including crypto exchanges and other intermediaries).[1]

The IRS has now finalized Form 1099-DA requiring brokers to undertake the following:

• Do tax due diligence and backup withholding: Correctly establish valid tax due diligence information, including certifying U.S. tax identification numbers (TINs), which many brokers did not do in the past, and determine applicability of backup withholding tax where applicable.
• Gather transactional information: Collect gross proceeds and cost basis data.
• Report specific information: Submit first Form 1099-DA on the new Information Return Intake System (IRIS) in 2026 for tax year 2025.

While these requirements are specific to the U.S., large financial institutions and brokers who operate outside the U.S., or those with U.S. customers, will have to consider the OECD’s CARF, which has over 63 committed jurisdictions.

Effective January 1, 2026, brokers who effectuate exchange transactions will be required to undertake a similar due diligence and information collation process, as outlined above. The OECD’s CARF is an extension of the CRS, however there are some key differences with CARF with the introduction of broad nexus rules to determine the reporting jurisdiction. Additionally, CARF reporting is token-based per acquisition/disposal, rather than a year-end aggregate account balance, as under CRS.  

Challenges

This leads to the technical challenge of determining which entity will report under CARF, while also recording and reporting large amounts of data. This data challenge will be evidenced by the first Form 1099-DA reporting, with the IRS anticipating billions of DA forms to be lodged by brokers. With the U.S. also committed to the Automatic Exchange of Information (AEOI) under CARF, in principle, the undertaking for brokers is high. Jurisdictions have also proposed penalty regimes for those who fail to comply with the regulations – with the U.K. set to apply penalty charges on a per account basis.

Additional Complexity

The complexity for brokers doesn’t end there. If we have learned any lessons from the OECD’s CRS framework, it is that member jurisdictions must implement significant variations to the model rules into local law. The EU finalized its interpretation of the CARF (DAC8) with additional extra-territorial reach, meaning foreign brokers with local customers are also caught within its framework.

Additionally, EU brokers who do not obtain valid self-certifications will have to comply with account-freezing obligations, potentially leading to operational headaches.  A point of divergence between IRS Form 1099-DA regulations and the CARF is the broad application of DeFi brokers under CARF. While the IRS issued final guidance on the Form 1099-DA reporting for DeFi brokers, this has come under intense scrutiny, and the ultimate position on DeFi broker reporting is still uncertain. The CRS has also received its own facelift (CRS 2.0), with certain digital asset derivatives, electronic money accounts (excluding stablecoins) and Central Bank Digital Currencies (CBDCs) falling within scope of these separate requirements that are also set to go live alongside the CARF regulations as of January 1, 2026.

Referencing Table 1 above, it is possible for large multinational online brokers to fall within scope of most (if not all) reporting regimes. With each jurisdiction adopting different approaches, compliance can become a minefield. Banks who centralize their tax operations functions and are familiar with CRS and Foreign Account Tax Compliance (FATCA) will have a head start over crypto natives who come across tax reporting frameworks for the first time.

Reporting readiness is a challenge

Despite the IRS Form 1099-DA period being effective from 2025, gross proceeds reporting begins in 2026. CARF is effective from 2026 with the first exchange of information by 2027. However, the timeline can be misleading, as lead time for implementation is required to undertake the following:

• Education: The industry is still getting up to speed with these new requirements. Internally, there is often a challenge to understand what the requirements are and provide education to the relevant stakeholders to start thinking about how to operationalize the compliance process.
• Determination of in-scope regimes and products: Brokers and financial institutions must determine which reporting jurisdiction they are in – particularly for CARF where nexus rules are broad. Banks who issue a mix of traditional and emerging crypto products will need to determine which products are in-scope for CARF/DAC8 and CRS/ CRS 2.0. A very pertinent challenge is how to identify a particular product in-scope for reporting. The tracking of traditional assets, such as bonds through CUSIPs, are common, but the digital asset industry has only recently started to adopt digital asset identifiers. Most commonly, the Digital Token Identifier Foundation (DTIF) registry has gained recognition with The European Securities and Market Authority (ESMA) and the IRS.
• Due diligence: While tax due diligence requirements can impact the overall account opening experience if not carefully managed, penalties and incorrect management of Personally Identifiable Information (PII) data can be detrimental. It is important to consider whether collected due diligence information is sufficient for tax purposes. How will customer data be obtained, validated and cross-referenced by other internal systems? For the U.S., a best practise measure includes utilizing the IRS TIN matching program. This program enables a participant to check the TIN furnished by a payee against the name/TIN contained in the IRS database prior to filing a Form 1099. For OECD countries, a valid self-certification is generally required prior to effectuating transactions.
• Consider technology: With all requirements leading to vastly increased transaction volumes and information reporting volumes, internal systems must be able to handle the data requirements both on the transactional and tax information reporting side.

With reporting deadlines getting closer, and the imposition of compliance failure penalties, brokers have a lot to consider to ensure that they are compliant with these new global frameworks. S&P Tax Solutions is proud to work with some of the largest financial institutions and crypto exchanges in shaping and delivering their tax reporting compliance program. 

The Tax Solutions at S&P Market Intelligence’s global tax ecosystem platform is a centralized solution to address all aspects of digital asset tax information compliance, including due diligence and tax withholding, transactional information gathering, cost basis tracking and tax information reporting for Form 1099-DA, CRS 2.0, CARF and DAC8.

S&P Global Market Intelligence - Tax Solutions offers Technology, Consulting and Managed Services for Global Tax Information Reporting and Compliance obligations.

S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

[1]“The Block: Bitcoin, Ethereum and Crypto News”, www.theblock.com.

[2] Brokers for the 1099-DA excludes non-custodial digital asset trading platforms (DeFi intermediaries). Section 6045 amended the Infrastructure Act definition of a broker to include: “Any person who, for consideration, is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”