While the proposed Clarity Act is widely viewed as a long‑overdue shift away from regulation‑by‑enforcement, it addresses only one side of the U.S. crypto adoption puzzle. In a detailed op‑ed, Robin Singh, CEO of crypto tax software firm Koinly, argues that the nation’s tax framework remains so convoluted that it acts as a structural barrier to mainstream participation.
Form 1099‑DA and the compliance nightmare. The centerpiece of current crypto tax reporting is Form 1099‑DA, which any business defined as a broker must issue. On paper it promises transparency and standardized reporting. In practice, Singh notes, it often reports gross proceeds without a reliable cost basis, ignores holding periods, and entirely excludes non‑custodial activity. The result is a fragmented, sometimes conflicting picture of an investor’s actual tax liability. For retail users, this means manually reconciling thousands of transactions across exchanges, wallets, bridges and DeFi protocols—often with data that doesn’t match what the IRS receives. Even industry firms struggle: when assets move between platforms, the cost basis frequently disappears, and the receiving exchange has no way to reconstruct historical purchase data. Yet the system is designed as if crypto could be reported with the same precision as traditional securities held in a single brokerage account.
The DeFi and self‑custody gap. A glaring blind spot is decentralized finance and non‑custodial wallets. These activities are effectively invisible to current reporting systems, leaving DeFi users to manually compile their entire transaction history from blockchain data. “The process is time‑consuming, error‑prone, and creates a high barrier to entry for less technical users,” Singh writes. The Clarity Act’s demands for continuous, real‑time audit trails are a necessary trade‑off for regulatory certainty, but the technical burden is steep, especially for mid‑sized firms caught just above the de minimis threshold.
Policy contradiction. The op‑ed points to an impossible contradiction: the U.S. wants to support innovation and market growth while imposing a tax reporting regime that pretends decentralized networks behave like traditional brokerage accounts. The IRS, Singh argues, does not need perfect, all‑seeing record‑keepers; it needs a framework that acknowledges fragmented ownership and cross‑platform asset movement. Other jurisdictions are moving toward more pragmatic solutions, such as the OECD’s Crypto‑Asset Reporting Framework, which emphasizes standardized data collection without pretending that intermediaries can reconstruct a perfect cost basis for every user.
What’s at stake. Without meaningful tax reform, adoption will stall at the edges, Singh warns. High‑net‑worth participants and sophisticated funds will continue to operate, but mainstream retail participation—the layer many argue is needed for true scale—will quietly opt out under the weight of compliance complexity. The U.S. won’t need to ban crypto to slow its growth; it can simply tax it into friction.
