This blog was last updated on September 30, 2025
Let’s call it like it is. Today, the cryptocurrency industry is facing its most significant regulatory milestone yet. The introduction of Form 1099-DA represents more than just another tax form; it signals a fundamental shift toward mainstream financial regulation for digital assets. For brokers, exchanges, and financial institutions, the question is no longer if crypto reporting will be enforced, but how prepared your systems are to manage it.
As the head of a global tax compliance solutions provider, I’ve witnessed countless regulatory changes, but few have presented both the complexity and opportunity that crypto reporting brings today.
The Transformation has Already Started
This isn’t a future concern. The timeline is already in motion:
- Mid-February 2026: The first 1099-DA forms are due to investors for 2025 transactions.
- End of March 2026: The deadline to submit to the IRS.
- 2027: Cost basis tracking becomes mandatory, fundamentally reshaping how digital asset transactions are calculated and reported.
What many organizations haven’t yet realized is that compliance with cost basis reporting requirements in 2027 requires them to start preparing their systems now. Every trade, fee and tax lot must be captured and calculated in real-time. Unlike other forms of reporting, there is no retroactive solution for cost basis compliance.
Beyond Forms: Crypto Tax Regulations Require System Integration
The biggest mistake I see is treating crypto compliance as a checklist of isolated tasks. Filing Form 1099-DA is only one piece of a much larger puzzle. True compliance requires the integration of:
- W-8/W-9 collection and validation
- TIN matching
- Cost basis reporting
- End-to-end tax reporting
Each of these elements must work seamlessly within a unified system. For example, starting January 1, 2027, every account must have valid documentation on file or face 24% backup withholding. That’s not a future problem—it’s an operational reality that demands preparation today.
Disconnected systems create gaps, and gaps create regulatory risk. In an industry where a single compliance failure can result in significant penalties and reputational damage, integrated solutions are an essential part of doing business.
Lessons from Traditional Finance Compliance
One advantage we have in addressing the issue of crypto tax compliance is our deep understanding of traditional financial reporting. The base principles of accuracy, scalability, and regulatory responsiveness that have governed information reporting for decades apply equally to digital assets.
Traditional finance taught us that compliance excellence is built upon three foundational musts: Robust data capture, intelligent processing capabilities, and comprehensive reporting functionality. These same principles apply to crypto tax regulations, but the stakes are amplified. Digital asset transaction volumes can far exceed traditional securities trades, and the complexity of crypto activity—from NFTs to stablecoins—requires technology purpose-built to scale on demand.
What to Look for in Crypto Tax Software
The market for crypto tax compliance solutions is crowded, with some providers undercutting prices to gain market share. While attractive pricing may seem appealing in the short term, organizations must evaluate compliance solution providers based on their regulatory reporting prowess and organizational stability.
That said, businesses would do well to focus less on the cost of implementation and focus more on the cost of non-compliance. For exchanges and financial institutions preparing for the crypto compliance future, I recommend focusing on these four strategic priorities:
- Integration: Evaluate solutions that deliver W-8/W-9 processing, TIN verification, cost basis reporting, and tax reporting within a unified experience. Streamlined integration across these core functions drives operational efficiency and reduces risk as compliance requirements expand.
- Scalability planning: Implement solutions designed for high-volume environments from day one and are proven to handle massive transaction throughput today. The crypto market’s growth trajectory suggests that today’s transaction volumes may represent a fraction of future requirements; proven experience handling billions of transactions is critical to reducing scaling risks.
- Regulatory agility: Partner with a provider who can quickly adapt to changing rules, as new requirements often emerge with little time to prepare. With states like Michigan and Montana already requiring 1099-DA reporting, agility will be essential as other states follow suit with limited time to spare before reporting season. The 1099-DA requirements represent the beginning, not the end, of crypto compliance evolution.
- Customer trust: Look for vendors with a strong track record of accuracy and reliability, because a single compliance error or poor experience can cause customers to move their crypto assets and entire portfolios elsewhere.
Examining What Comes Next for Crypto Reporting
Form 1099-DA marks crypto’s transition from regulatory frontier to mainstream financial compliance. The IRS has provided a transitional grace period for its initial stages, offering penalty relief for brokers who make what is deemed ‘a good faith effort to file the Forms 1099-DA and furnish associated payee statements correctly and on time.’ However, this short-term period of regulatory forgiveness only emphasizes the urgency for organizations to implement robust systems now because the regulatory requirements will only become more stringent.
Organizations that approach this transition strategically, by viewing compliance as a competitive advantage rather than merely a regulatory burden, will be better positioned to lead in the digital asset economy. The next two years will go a long way in separating industry leaders from followers. In other words, the race to separate which businesses can not only meet regulatory requirements but exceed customer expectations for transparency and accuracy is officially on.
In closing, I’d like to stress to every business out there that the future of crypto compliance isn’t just about filing forms. It’s about building an infrastructure that supports trust, transparency, and sustained growth in the digital asset ecosystem. The decisions organizations make today about their crypto tax compliance will determine their competitive position for years to come.
Learn how Sovos crypto tax solutions can help you stay ahead of IRS requirements with integrated, scalable compliance.