When President Biden signed the Infrastructure Investment and Jobs Act in November 2021, the cryptocurrency industry's immediate concern was a single provision: the expansion of broker reporting requirements to cover digital assets. That provision has shaped the U.S. regulatory landscape for crypto ever since, and in 2026 its practical effects are no longer hypothetical — they are part of the compliance reality for U.S.-based crypto holders, exchanges, and developers.
This article explains what the law actually requires, where the ongoing definitional disputes stand, what the civil liberties community has argued about its privacy implications, and what practical steps crypto holders should take to stay compliant.
What the Law Requires
The Infrastructure Act extended existing securities broker reporting rules to digital assets. Under these rules, exchanges and other entities defined as "brokers" must report customer transactions to the IRS in the same way that stock brokers report securities trades — providing information on the taxpayer, the assets involved, and the proceeds. The law also introduced a separate requirement: any individual or business receiving more than $10,000 in cryptocurrency in the course of a trade or business must file a report with the IRS identifying the sender, including name, address, and taxpayer identification number.
The intent is to capture the estimated tax gap created by underreported crypto income. Treasury projections at the time of passage estimated the provision could generate roughly $28 billion in additional tax revenue over a decade.
The Contested Broker Definition
The provision that drew the most intense industry criticism is the definition of "broker" — described in the original text as any person who "regularly provides any service effectuating transfers of digital assets on behalf of another person." The concern is that this language is broad enough to sweep in miners, proof-of-work validators, software developers, node operators, and decentralized protocol participants who do not have access to the customer identity information required for compliance. Asking a miner to report the identities of transaction parties is technically impossible — the miner never has that information.
Legislative efforts to narrow the definition, including the proposed Keep Innovation in America Act, have moved through various stages of the legislative process since 2021. As of 2026, the IRS has issued final regulations that attempt to clarify which entities fall within the broker definition — but legal challenges from the crypto industry have continued, and the regulatory picture remains active. Affected parties should monitor updates from the IRS digital assets page and consult qualified legal counsel for entity-specific guidance.
The Financial Privacy and Fourth Amendment Argument
A dimension of the law that received less mainstream coverage at passage concerns its implications for financial surveillance. Privacy advocates have noted that once a government agency links a blockchain address to a real identity — through broker reporting or other means — it gains visibility into every transaction associated with that address, including those below the $10,000 threshold. Because blockchain transaction records are permanent and public, this creates a retrospective surveillance capability that has no equivalent in traditional banking.
Legal scholars and civil liberties organizations have raised Fourth Amendment arguments along these lines: the Bank Secrecy Act — the underlying framework the crypto provision extends — requires financial institutions to collect and report customer data to the government without any individualized warrant or probable cause. Under the third-party doctrine, courts have historically held that individuals have no reasonable expectation of privacy in information voluntarily shared with third parties like banks. Critics argue this doctrine was developed for a different technological era and is incompatible with the scale of financial surveillance that blockchain reporting could enable. These arguments remain active in both legislative and judicial contexts as of 2026.
Practical Compliance Steps for Crypto Holders
Whatever the outcome of ongoing legal debates, U.S. crypto holders face existing reporting obligations today. The following steps help reduce audit risk and simplify tax season:
- Track your cost basis from day one. Record the date, amount, and USD market value of every crypto purchase. This forms the basis for calculating capital gains when you sell, trade, or spend the asset.
- Consolidate exchanges where possible. Using a single regulated exchange reduces the complexity of reconciling transaction records at year end.
- Use crypto-specific tax software. Tools such as Koinly, CoinTracker, or TaxBit are designed to import transaction data from wallets and exchanges and calculate gains, losses, and income automatically.
- Retain a crypto-knowledgeable tax professional. The tax treatment of DeFi activity, staking rewards, airdrops, and cross-chain swaps continues to evolve and requires specialist knowledge.
- Keep wallet private keys and seed phrases secure and offline. Tax compliance does not require disclosing your keys to anyone — only your transaction history and resulting gains or losses.
For holding and transacting Monero with maximum privacy, XMRWallet provides a free, non-custodial web wallet. No registration, no logs, no third-party access to your keys.
Frequently Asked Questions
Does the crypto reporting law apply to non-US residents?
The U.S. broker reporting requirements apply to U.S.-based entities and U.S. persons wherever located. Non-U.S. residents transacting through U.S.-based exchanges may also have their data reported. Each jurisdiction has its own crypto tax rules — consult a tax professional in your country of residence.
Is using a non-custodial wallet like XMRWallet a way to avoid taxes?
No. Tax obligations are based on taxable events — sales, trades, income — not on whether you use a custodial or non-custodial wallet. Using a non-custodial wallet protects your financial privacy and gives you control of your keys, but does not eliminate your obligation to report taxable transactions.
What is the penalty for failing to report crypto transactions to the IRS?
Penalties vary depending on whether the failure is considered negligent or willful. Civil penalties for negligent underreporting can be a percentage of the tax owed. Willful tax evasion is a criminal offense carrying potential fines and imprisonment. The IRS has significantly expanded its crypto enforcement capacity since 2021.
