The U.S. Internal Revenue Service (IRS) has proposed a significant regulatory change that would allow cryptocurrency brokers to require electronic delivery of tax forms to their customers, potentially eliminating the requirement for paper copies. The draft regulation, published under the title "Electronic Provision of Buyer Declarations Regarding Digital Asset Sales by Brokers," was announced on March 5, 2026.
The proposed rule would permit crypto exchanges like Coinbase and Kraken to provide tax notifications electronically without being obligated to send paper documents if customers refuse electronic delivery. According to the IRS proposal, "These proposed regulations would generally not require brokers to furnish the 1099-DA statements on paper to any customer that does not consent to receiving these statements electronically."
Notably, the draft regulation also states that brokers could be given the option to terminate business relationships with customers who reject electronic delivery of tax forms. This represents a departure from previous requirements where brokers had to offer clients the option of receiving paper copies.
This regulatory proposal coincides with the implementation of the IRS's new reporting system for tracking cryptocurrency transactions. As of 2026, crypto brokers are required to report both gross proceeds and cost basis for digital asset sales to the IRS via Form 1099-DA. This system provides tax authorities with direct access to users' profit and loss information, which the IRS states aims to improve tax compliance in cryptocurrency transactions and prevent underreporting.
The IRS, an agency of the U.S. Treasury Department, emphasized that the regulation is designed to enhance tax compliance oversight for cryptocurrency holders. The automatic receipt of detailed gain/loss data for users is expected to significantly reduce underreporting in the crypto sector.
The proposed rule change has not yet gone into effect and is currently open to public comment. This development follows increased IRS scrutiny of cryptocurrency transactions, with crypto tax software platform CoinLedger reporting a massive increase in U.S. users receiving warning letters from the IRS last year reminding them that crypto transactions may be taxable and should be reported.
