Broker or Platform? How the New U.S. Crypto Bill Could Redefine Reporting and Tax Forms

Hook: Why traders and tax filers should care right now

Crypto traders, bookkeepers, and tax professionals are used to a changing game — but the draft U.S. crypto bill unveiled in January 2026 could change the rules mid-play. If enacted, new legal definitions of who qualifies as a broker for tax purposes would reshape how 1099s are issued, who is responsible for reporting gains and losses, and what traders must track on their books. That matters for everyday traders juggling dozens of wallets and for exchanges and DeFi teams trying to understand new reporting obligations.

The core change: a statutory broker definition

At the center of lawmakers’ draft is a clearer, narrower description of market participants that qualify as brokers. Historically, broker status under IRS rules has been rooted in securities and payments law and focused on intermediaries who execute or process trades. The draft legislation released in January 2026 explicitly targets digital-asset intermediaries — from centralized exchanges to custodial services — and proposes criteria that could bring some—but not all—crypto actors into the 1099 reporting fold.

What the draft does and why it matters

• Creates statutory clarity: The draft aims to remove ambiguity about whether a CEX, a noncustodial wallet provider, a validator, or a DEX is a broker for tax reporting.
• Aligns crypto with existing broker tax mechanics: If a platform is a broker, it would likely need to issue forms similar to 1099-B or a specialized 1099 for crypto that includes cost basis, proceeds, and proceeds date.
• Shifts compliance burden: Traders who previously relied on exchanges’ statements could see more consistent cost-basis reporting — but only if the entity touching the assets is deemed a broker. Platforms and teams should plan operations similarly to how low-latency trading ops plan for resilience.

How 1099 reporting could change — practical implications

There are three practical reporting regimes to anticipate under the draft: centralized broker reporting, limited reporting from custodial intermediaries, and minimal-to-no reporting for purely peer-to-peer or on-chain-only activity. Each has different consequences for traders’ bookkeeping and IRS compliance.

1) Centralized exchanges and custodial services

If the bill treats custodial intermediaries as brokers, expect these changes:

• Mandatory cost-basis reporting: Exchanges would be required to report acquisition date, cost basis, proceeds, and gain/loss per disposition — similar to 1099-B for stocks. Platforms should plan data pipelines much like audit-ready pipelines that capture provenance.
• Lower taxpayer record-keeping friction: Traders using CEX custody could receive near-complete annual statements suitable for filing. Still, many traders will need to supplement reports with exports and reconciliations using affordable tools (for example, OCR tools) to ingest historic CSVs.
• Withholding and backup measures: Platforms that fail to collect accurate taxpayer information could face backup withholding obligations, mirroring current 1099 rules. Platform operations teams should treat compliance readiness like other platform-level operational workstreams (see platform ops planning).

2) DeFi, DEXs, relayers, and smart contracts

Decentralized platforms pose the hardest policy questions. The draft tries to address them by focusing broker status on entities that exercise control or custody, not the smart contracts themselves:

• Smart contracts likely treated as non-brokers: Purely on-chain logic without identifiable custodial operators may fall outside the broker definition. That leaves the onus on users to preserve audit-ready records of their activity.
• Middlemen could be in-scope: Relayers, custodial bridges, or off-chain coordinators that process trades or custody assets might qualify as brokers — operators of these systems should think about custody and provenance similar to how collectible marketplaces consider ownership rules (see collector behavior and credentialized ownership).
• Implication for users: Traders on DEXs should assume they are responsible for detailed bookkeeping unless a named counterparty provides 1099-style reporting.

3) Self-custody and peer-to-peer

For users whose keys never leave their control, the draft keeps responsibility squarely on the taxpayer. That means:

• No automatic 1099s: Self-custodial wallets without a centralized service to issue forms will not be sending 1099s. Consider local-first solutions and device-based storage patterns when designing your personal archive (see local-first sync appliances).
• Increased documentation burden: Traders must track cost basis, transaction timestamps, and on-chain receipts to substantiate positions during an audit — make those receipts tamper-evident and portable, like the immutability patterns in audit-ready text pipelines.

How this changes day-to-day bookkeeping — a case study

Consider a mid-frequency trader, “Alex,” who traded 1,200 spot and margin transactions in 2025 across two centralized exchanges, a DEX, and a self-custody wallet.

1. Under current patchwork reporting, Alex receives a 1099-K from one exchange, a CSV export from the other, and no reports from the DEX or self-custody wallet.
2. If the new bill deems both exchanges as brokers, Alex would receive detailed 1099s with cost basis and proceeds for the exchange-traded transactions, reducing time reconciling CSVs. But Alex should still test reconciliation flows end-to-end using robust tooling and local backups (a simple thumbdrive or secure travel kit like the NomadVault model).
3. However, for the DEX and self-custody wallet trades Alex still must reconcile on-chain records and provide own cost-basis entries; consider ensuring your bridge and cross-chain activity is instrumented similar to how specialized collectible platforms track fractional ownership events.

Practical outcome: consolidated broker reporting reduces reconciliation errors for custodial activity but does not eliminate the need for rigorous personal bookkeeping for on-chain and self-custody activity.

What traders need to do now — actionable checklist

Whether you trade occasionally or professionally, prepare for the change with these steps.

1. Audit your counterparties: Create an inventory of where you hold and trade crypto (CEXes, CEX custody, bridges, DEXs, wallets) and flag which entities are likely to be treated as brokers. Treat this inventory like a platform-ops inventory to ensure you can respond to notices quickly (platform ops).
2. Start uniform recordkeeping: Export and archive CSVs and on-chain transaction history in a consistent format (date/time UTC, tx hash, wallet address, asset, amount, USD value at time of transaction, fees, counterparty). If you rely on CSVs from exchanges, consider OCR + ingestion tools to normalize older PDFs and statements (OCR tools).
3. Use trusted tax software: Move to an aggregator that supports both custodial imports and on-chain reconciliation (examples include TaxBit, CoinTracker, CoinLedger — evaluate for your needs). Automate daily snapshots where possible and store copies in a secure, local-first sync or archive solution (local-first sync).
4. Cost-basis policy: Adopt a documented cost-basis accounting method (FIFO, LIFO, specific ID) and keep a written policy; platforms may implement their own defaults which can affect reported gains.
5. Prepare for reconciliations: Even when brokers report, match their 1099s to your own ledger before filing. Mistakes or mismatched tax lots are common sources of IRS notices. Model reconciliation processes after robust trading reconciliation playbooks used by active desks (intraday trading ops).
6. Consult a crypto tax pro: For high-frequency or large portfolios, enlist a CPA experienced in digital assets to review how new broker reporting integrates with your filings. Family-office level advice can be useful for complex estates (family office succession patterns).

Tax consequences to anticipate

Here are the most important tax outcomes traders should watch for if the bill becomes law:

• More precise IRS matching: Detailed cost-basis reporting increases the IRS’s ability to match third-party reports to your returns, reducing leeway for unreported gains.
• Shift in burden where liability lies: Brokers will carry more compliance cost; however, ultimate tax liability remains with the taxpayer. Incorrect broker reports don’t absolve taxpayers from correcting their returns.
• Potential for expanded withholding: Platforms that fail to obtain accurate taxpayer information could be subject to backup withholding policies, adding costs for traders with incomplete KYC. Platforms should bake these governance checks into ops similar to other platform-compliance playbooks (platform ops).
• Possible narrowing of tax gap: With more transactions reported, the overall tax gap on digital assets may shrink, increasing audit activity on inconsistent filers. Expect auditors to request provenance and immutable receipts — design your records with provenance in mind (see audit-ready provenance).

Open questions and operational realities for platforms

Even with a statutory definition, practical issues remain:

• How to value tokens with no liquid USD pair: Platforms must settle on valuation sources for illiquid tokens, impacting reported proceeds.
• Cross-chain complexity: Reporting across bridges and wrapped tokens creates duplicative or mismatched records that platforms will need to normalize. Engineers working on bridges should borrow patterns from resilient cross-chain testbeds and hosted tunnel work (hosted tunnels & testbeds).
• Attribution of counterparty: When an order is executed via multiple liquidity sources, which entity reports? The bill leans toward the entity with custody or control, but edge cases persist.

DeFi protocols and intermediaries: risk and compliance strategies

DeFi teams and bridge operators should act now to reduce regulatory risk:

• Know-your-operator: If you operate any off-chain service — relayers, custodial bridges, L2 sequencers — map how your service meets the proposed broker criteria. Fractional ownership marketplaces and custodial bridges have already wrestled with similar operator questions (fractional ownership).
• Design audit trails: Build opt-in reporting APIs and exportable, auditable transaction histories that users can rely on for tax reporting. Patterns developed for credentialized assets can be instructive (collector behavior).
• Consider optional custodial services: Some protocols may offer custodial layers or partnerships with licensed brokers to provide full 1099-style reporting.
• Engage with regulators: Industry groups and trade associations should seek clarifications on edge cases to avoid unintended classification of smart contracts as brokers.

Enforcement, penalties, and the specter of expanded audits

Increased reporting typically leads to higher compliance enforcement. Expect:

• More IRS correspondence: Reports with mismatched basis will trigger notices; keep reconciliations documented for at least seven years for contested items. Use robust local archives and device-backed backups if you travel often (portable secure kits).
• Potential platform liability: Platforms failing to comply with new reporting standards could face penalties, which may be passed on to users through operational changes or service fees.
• State tax coordination: Some states may piggyback on federal reporting to refine their own enforcement of crypto-related income.

Policy context — why Congress is acting in 2026

The draft bill follows heightened regulatory activity in 2025, including a federal stablecoin framework that clarified bank and stablecoin interactions. Lawmakers and industry groups view clear tax reporting rules as essential to mainstream adoption and market integrity. From Capitol Hill’s perspective, a statutory broker definition reduces regulatory fragmentation, helps the IRS collect taxes more efficiently, and eases institutional onboarding.

“The draft legislation aims to give digital markets the same reporting clarity that securities and payments enjoy — but policymakers must balance ease of enforcement with the unique architecture of decentralized finance,” wrote policymakers in early 2026.

Advanced strategies for traders and CPAs

For sophisticated traders and advisors, consider these advanced moves:

• Proactive lot accounting: Use specific identification where possible. Document your selection method for tax lots immediately after transactions to preserve tax positions in the event of scrutiny.
• Use time-stamped off-chain proofs: Keep immutable proofs (tx hashes, signed messages) that corroborate acquisition and disposal dates in case platform-reported timestamps differ. Treat provenance like an audit pipeline (audit-ready provenance).
• Cross-platform reconciliations: Run monthly reconciliations between exchange statements and your own ledger; flag diffs and resolve before year-end. Active traders often borrow techniques from intraday operations to automate detection of mismatches.
• Tax-loss harvesting automation: Build or adopt tools that can identify loss windows across CEXs and wallets while respecting your chosen tax lot method.

What to watch in the legislative process

Key milestones and signals to monitor:

• Committee markups: Technical changes to broker definitions often happen in committee. Watch for amendments that narrow or broaden custody-based language.
• Regulatory crosswalks: If the bill assigns the CFTC primary authority for spot markets (as the draft suggests), expect coordination memos between CFTC and Treasury/IRS on compliance implementation.
• Implementation timelines: Effective dates and phased implementation windows matter. Exchanges and DeFi projects need time to build reporting pipelines — plan these as platform initiatives (platform ops).
• Guidance from Treasury/IRS: Even after passage, Treasury will likely issue implementing rules and guidance — these will flesh out valuation methods and reporting formats.

Final takeaways — what every stakeholder should do this quarter

• Traders: Improve record-keeping now; assume more detailed 1099-style reporting from custodial platforms but be ready to document on-chain activity yourself. Use local archives and portable kits for backups (secure travel storage).
• Exchanges & custodians: Inventory data flows, plan for cost-basis calculation, and build APIs for user downloads and IRS transmission. Treat this work as platform ops engineering (platform ops).
• DeFi operators: Engage legal counsel to determine if any part of your stack could be captured by a broker definition; design optional reporting-friendly features and audit trails similar to credentialized ownership models (collector behavior).
• Tax pros: Update client intake forms to capture cross-platform and self-custody activity; test import and reconciliation workflows with major platforms and consider family-office best practices for higher-net-worth clients (family office simulations).

Closing: The path forward for compliance and growth

The January 2026 draft bill is a turning point. By clarifying who is a broker in the crypto ecosystem, Congress would make reporting more uniform and taxable events easier for the IRS to match — a double-edged sword that improves transparency but increases compliance demands on traders and protocols. The changes will not be instantaneous: expect phased implementation, further rulemaking, and political negotiation. Still, the trend is clear — institutional-grade reporting is arriving for digital assets.

Actionable next step

Start reconciling your 2025 transaction history today and set up automated exports. If you manage more than $50,000 in realized gains or run a trading business, book a consultation with a crypto-savvy CPA and evaluate tax software providers that support combined custodial and on-chain reconciliation.

Call to action

Stay ahead of the bill and its downstream rules: subscribe to our weekly Tax & Compliance brief for plain-English analyses, platform impact assessments, and a downloadable compliance checklist tailored for traders and accountants. If you’re a platform or DeFi operator, contact our policy desk for a rapid compliance readiness review.

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