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The requirement for brokers to report digital asset transactions is a result of changes to Internal Revenue Code §6045 made by the Infrastructure Investment and Jobs Act (IIJA) (signed in late 2021). Treasury and IRS issued final regulations on reporting by brokers on dispositions of digital assets for customers in certain sale or exchange transactions. This reporting is required to be made on Form 1099-DA beginning with transactions on or after January 1, 2025.
The frequently asked questions (FAQs) below expand on digital asset broker reporting.
Q1. My business provides custodial services to large digital asset institutions and investors. We do not execute sale transactions for our customers. When a customer wants to sell digital assets that are in our custody, they direct us to transfer the requisite number of digital assets to an exchange platform. We generally do not know the nature of the transaction undertaken at this other platform or the gross proceeds received. Do we have a reporting obligation under section 6045 and Treas. Reg. §1.6045-1 in this fact pattern? (added Oct. 30, 2025)
A1. No. The regulations under Treas. Reg. §1.6045-1 only require reporting of sale transactions that a broker effects for its customers. The fact pattern you described does not constitute a sale transaction that your business effected under these regulations.
Q2. My business operates a digital asset kiosk that enables customers to walk up to our terminals and sell or exchange their digital assets for cash, stored-value cards or different digital assets. Do we have a reporting obligation under section 6045 and Treas. Reg. §1.6045-1 in this fact pattern? (added Oct. 30, 2025)
A2. Yes. The regulations under Treas. Reg. §1.6045-1 treat digital asset kiosks that effect sales of digital assets as digital asset middlemen, a type of broker subject to the section 6045 reporting obligations. When your customer uses your services to sell or exchange digital assets for cash, stored-value cards, or different digital assets, you have effected a sale of the digital assets under the regulations. Accordingly, you must file a Form 1099-DA and furnish your customer an associated payee statement, with respect to these sale transactions.
Q3. My business is a custodial digital asset broker. One customer transferred in digital assets from another custodial broker. At the request of the customer, the transferring broker provided an acquisition information statement that sets out the purchase dates and purchase prices associated with the digital assets transferred in. The transferring broker also provided purchase confirmations to support the information provided in the acquisition information statement. Later, the customer sells some of the digital assets that were transferred in and specifically identifies, no later than the date and time of the sale, that the units sold should be ordered based on the units with the highest basis being sold first. Are we permitted to treat the purchase price information from the transferring broker as customer-provided information for purposes of determining which digital assets were sold? (added Oct. 30, 2025)
A3. Yes. Under Treas. Reg. §1.6045-1(d)(2)(ii)(B)(4), a broker is permitted, but not required, to take into account customer-provided acquisition information for purposes of identifying which units are sold, disposed of, or transferred (lot ordering) out of the customer’s account with the broker as long as that information is reasonably reliable information. The acquisition information statement, along with the purchase confirmations, provided by the customer’s agent (the transferring custodial broker) constitutes reasonably reliable information for this purpose. You are not permitted to use this information from the transferring custodial broker to report the basis of the transferred-in units on Form 1099-DA.
Q4. My business is a custodial digital asset broker. One customer transferred in three separate lots, each containing 10 units of digital asset DE (total 30 units), on three different dates from another broker. The transferring broker provided purchase date information associated with each lot as follows:
| Number of Units
Transferred-in |
Transfer In Date | Purchase Date |
|---|---|---|
| 10 (Lot 1) | 1/1/2025 | 1/1/2017 |
| 10 (Lot 2) | 2/2/2025 | 2/1/2025 |
| 10 (Lot 3) | 3/3/2025 | 3/3/2019 |
During 2026, the customer sells all three lots on three different days. In advance of these sales, the customer requests that we order the lots sold by looking first to the last-purchased units. If the customer’s broker had not provided the acquisition information, the sales would have been ordered as follows: Lot 3, Lot 2, and Lot 1. Using the acquisition information provided by the transferring broker, in contrast, the sales have been ordered as follows: Lot 2, Lot 3, and Lot 1. Because Lot 1 was not affected by the acquisition information (i.e., this lot was the last lot sold under either method), should we check Box 8 (Check if broker relied on customer-provided acquisition information) on Form 1099-DA for the sale of that Lot 1? (added Oct. 30, 2025)
A4. Yes. The regulations do not require brokers to keep track of whether the customer-provided acquisition information (in this case supplied by the transferring broker) would have affected the ordering of the specific lot being sold. Rather, if the broker uses customer-provided acquisition information in determining which unit was sold, the broker should report that it has done so regardless of whether that information affected the ordering of the particular unit sold.
Q5. Assume the same facts in Q3, except that the customer sold all three lots of the transferred-in digital assets in the same transaction. Do we need to report this sale on three different Forms 1099-DA so that we can report the different transfer-in dates in Box 12b (If transferred in, provide transfer-in date)? (added Oct. 30, 2025)
A5. No. Because all 30 units were sold in a single transaction, you may report this sale on one Form 1099-DA. As the 2025 instructions to the Form 1099-DA state, you should leave Box 12b blank if the digital assets sold were transferred in on a variety of dates.
Q6. Assume the same facts in Q3, except that after selling all three transferred-in lots, the customer transfers in 50 units of DE without providing purchase date information. When the customer sells these 50 units, should we check Box 8 (Check if broker relied on customer-provided acquisition information) on Form 1099-DA for the sale of these units? (added Oct. 30, 2025)
A6. No. Once all units for which acquisition information was provided have been sold, the broker should not continue to check Box 8 on Form 1099-DA when it effects the sale of newly transferred-in units unless the customer provides new information with respect to the newly transferred-in units.
Q7. My business is a custodial digital asset broker. One customer transferred in digital assets from another custodial broker. The transferring broker provided an acquisition information statement that sets out the purchase dates and purchase prices associated with the digital assets transferred in. The transferring broker also provided purchase invoices to support the information provided in the acquisition information statement. The customer has asked us to voluntarily report the basis of the transferred-in digital assets when sold based on the purchase prices provided by the transferring broker. Are we permitted to rely on this customer-provided acquisition information for purposes of basis reporting on Form 1099-DA? (added Oct. 30, 2025)
A7. No. Under Treas. Reg. §1.6045-1(d)(2)(ii)(B)(4), a broker is permitted to take into account customer-provided acquisition information for lot ordering purposes only. You may not rely on this customer-provided acquisition information to report the customer’s basis in the digital assets sold on Form 1099-DA.
Q8. My business is a custodial digital asset broker. Using our services, one customer purchases units of digital asst DE as follows:
| Number of Units
Purchased |
Purchase Date |
|---|---|
| 10 (Lot 1) | 2/15/2023 |
| 20 (Lot 2) | 9/30/2026 |
This customer sells all 30 units in a single transaction on 12/1/2027. We will provide optional basis reporting for the units purchased on 2/15/2023. Since the gain or loss with respect to all digital asset units sold will be long-term, are we permitted to report this sale on one Form 1099-DA? If we report this sale on only one Form 1099-DA, will we lose the relief from penalties under section 6721 or 6722 for voluntarily reporting the basis of the units purchased on 2/15/2023, if the reported or furnished information is incorrect? (added Oct. 30, 2025)
A8. If you voluntarily report the basis of the units purchased on 2/15/2023, you may report the sale of all 30 units on one Form 1099-DA. If you do that, however, you may not check Box 9 (Check if digital asset is a noncovered security) because not all of the units sold are noncovered securities. Accordingly, you will be subject to penalties under sections 6721 and 6722 for failure to report basis correctly even if you are reporting the sale of a noncovered security. Alternatively, if you voluntarily report the basis of the units purchased on 2/15/2023, you may file two separate Forms 1099-DA, one for the units purchased on 2/15/2023 and another for the units purchased on 9/30/2026. For the Form 1099-DA filed with respect to the units purchased on 2/15/2023, you may check Box 9 (Check if digital asset is a noncovered security) to indicate that these units are noncovered securities, in which case you will be entitled to the relief from penalties under section 6721 or 6722 for failure to report or furnish the voluntarily reported basis information correctly. Do not check Box 9 for the Form 1099-DA that you file with respect to the units purchased on 9/30/2026.
Q9. My business is a custodial digital asset broker for specified NFTs. We also enable artists to mint specified NFTs reflecting their artwork. During one calendar year, an artist customer uses our services to sell both newly minted specified NFTs and other specified NFTs that the customer did not mint. We intend to report these sales using the optional method for reporting specified NFTs. Should we report this customer’s sales on one Form 1099-DA or two? (added Oct. 30, 2025)
A9. You should file two separate Forms 1099-DA for this customer, one for the sales of units of specified NFTs that this customer minted and another for the sales of the specified NFTs that this customer did not mint. For the Form 1099-DA filed reflecting the sale of specified NFTs that this customer minted, you should leave Box 1f (Proceeds) blank and report the aggregated gross proceeds only in Box 11c even though Box 11c states “For aggregate reporting of specified NFTs, aggregate gross proceeds reported in 1f that are attributable to first sales by creator or minter.” The IRS is aware that this text in the 2025 Form 1099-DA incorrectly states that the gross proceeds should also be reflected in Box 1f and Box 11c. The text of Box 11c will be corrected in future versions of the Form 1099-DA. For the Form 1099-DA filed reflecting sales of specified NFTs that this customer did not mint, you should report the aggregated gross proceeds only in Box 1f as indicated in the 2025 Instructions.
Q10. My business is a custodial digital asset broker for specified NFTs. We intend to report all our customers’ sales using the optional method for reporting specified NFTs. During calendar year 2026, our customer sold only one specified NFT that the customer previously purchased using our services. The proceeds from this sale exceeded $600. Are we permitted to use the optional method for reporting specified NFTs for this customer who only sold one specified NFT? That is, for this customer, are we permitted to leave blank Boxes 1d (Date acquired), 1e (Date sold or disposed), 1g (Cost or other basis), 2 (Check if basis reported to IRS), 5 (Check if loss is not allowed based on amount in 1f), 6 (Gain or loss:), 8 (Check if broker relied on customer-provided acquisition information), and 9 (Check if digital asset is a noncovered security) on the Form 1099-DA? (added Oct. 30, 2025)
A10. Yes. You are permitted to use the optional method for reporting specified NFTs for this customer even though the customer only sold one specified NFT. For this Form 1099-DA, you may leave blank Boxes 1d, 1e, 1g, 2, 5, 6, 8, and 9.
Q11. My business is a custodial digital asset broker. If my customer sells 100 units of digital asset DE for cash and pays 1 additional unit of DE to pay for the transaction fee, how do we determine the basis of the 1 additional unit of DE? (added Oct. 30, 2025)
A11. Other than exchanges of digital assets for different digital assets where the units to pay for transaction fees are withheld from the digital assets received, you should follow the general rules for lot selection. That means if the customer has not specifically identified the unit sold, you should apply FIFO to determine the DE unit sold to pay for the transaction fees.
Q12. My business is a custodial digital asset broker. If my customer exchanges 100 units of digital asset DE for different digital asset ST and 1 unit of ST is withheld from the ST units the customer receives to pay for the transaction fee, how do we determine the basis of the 1 unit of ST that the customer disposed to pay for the transaction fee? (added Oct. 30, 2025)
A12. When, in an exchange of digital assets for different digital assets, the unit used to pay for the transaction fees is withheld from the digital assets received, Treas. Reg. §1.6045-1(d)(2)(ii)(B)(3) provides that the withheld units, regardless of any other customer identification made, must be deemed to be adequately identified as coming from the units acquired. Additionally, you do not have to report the sale of the ST unit used to pay for the transaction fees if it is withheld from the digital assets received under Treas. Reg. §1.6045-1(c)(3)(ii)(C).
Q13. My business is a custodial digital asset broker. All sales that we effect for customers are executed on a digital asset trading platform that we operate. Our customers often engage in sale transactions involving digital asset SB, a digital asset the value of which is designed to track the U.S. dollar. To determine if digital assets can be treated as qualified stablecoins eligible for the optional reporting method, Treas. Reg. §1.6045-1(d)(10)(ii)(B) requires that the digital asset satisfy one of two stabilization mechanisms. Under Treas. Reg. §1.6045-1(d)(10)(ii)(B)(1), the digital asset must use a stabilization mechanism that causes the unit value of the digital asset not to fluctuate from the unit value of the convertible currency it was designed to track by more than 3% over any consecutive 10-day period during the calendar year. Will SB fail this stabilization mechanism test if its unit value fluctuates from the value of the U.S. dollar by more than 3% for only one trade during any consecutive 10-day period in 2025 (for example, the unit value fluctuates from the value of the U.S. dollar by more than 3% for one trade on January 10, 2025, while the values for all other trades during all consecutive 10-day periods do not fluctuate by more than 3%)? (added Oct. 30, 2025)
A13. No. Because the regulation requires that the digital asset not fluctuate by more than 3% from the unit value of the convertible currency it was designed to track over any consecutive 10-day period during the year, just one instance of this fluctuation will not cause the digital asset to fail this stabilization mechanism test. In contrast, if the unit value fluctuates from the value of the U.S. dollar by more than 3% for at least one trade on each day beginning January 10, 2025, through January 19, 2025, these fluctuations for the consecutive 10-day period would cause the digital asset to fail this stabilization mechanism test.
Q14. Assume the same facts in Q12, except our platform guarantees we will purchase any unit of SB for $1 in cash for the entire calendar year even if sales of SB at another digital asset platform reflect fluctuating values. How do we apply the stabilization mechanism test in Treas. Reg. §1.6045-1(d)(10)(ii)(B)(1)? Should we apply the test based solely on sales of SB on our digital asset trading platform, where the valuation of SB never fluctuates, or are we required to also look at the value of SB based on sales of SB at other platforms? (added Oct. 30, 2025)
A14. You may determine if the value of SB fluctuates by more than 3% over any consecutive 10-day period during the year based solely on the sales of SB on your digital asset trading platform. Accordingly, your policy of offering to purchase any unit of SB for $1 for the entire calendar year enables SB to satisfy the stabilization mechanism test in Treas. Reg. §1.6045-1(d)(10)(ii)(B)(1).