Washington may soon unveil the long-awaited regulatory framework for digital assets, but critics argue that relying solely on market structure legislation will not drive mainstream cryptocurrency adoption. According to CoinDesk, the missing key lies in tax reform, not regulatory transparency.
The Role and Limitations of the CLARITY Act
Even if the CLARITY Act passes in the Senate, another parallel issue remains unresolved: the U.S. crypto tax system is widely regarded as unworkable for ordinary users. The core issue lies with the 1099-DA form, which the IRS is set to introduce for the 2025 tax year.
The 1099-DA form is primarily used to report certain digital asset sales processed by custodial brokers, meaning it may cover activities on centralized exchanges but will not automatically include all operations users conduct in wallets, decentralized finance (DeFi News) platforms, staking projects, NFT markets, or peer-to-peer transactions.
For users participating in decentralized finance, the introduction of the 1099-DA may lead to greater confusion, inaccurate reporting, and audit risks due to the mismatch between how crypto transactions operate and the form's reporting requirements.
After considering exemptions and out-of-scope activities, the reporting gap becomes quite significant, with estimates suggesting that only about half of transactions will be covered by the 1099-DA. The lack of cost basis information is expected to be the most immediate obstacle in the current tax season.