The US Internal Revenue Service (IRS) now treats every crypto-to-crypto swap as a taxable disposal event, requiring capital gains calculations, while South Korea’s trading volume collapsed nearly 55% in the first half of 2026 as the market braces for its own long-delayed crypto tax.
Under IRS Notice 2014-21 and updated guidance, exchanging one cryptocurrency for another—even stablecoins like USDC or a swap between two stablecoins—triggers a taxable event. Taxpayers must compute the difference between fair market value at the time of swap and original cost basis. Short-term gains on assets held one year or less are taxed at ordinary income rates of 10% to 37%, while long-term gains enjoy preferential rates of 0%, 15% or 20%. Form 1099-DA debuted for the 2025 tax year, forcing centralized exchanges to report gross proceeds from digital asset sales and swaps. For 2025 transactions, cost basis reporting is not mandatory, but starting with 2026 transactions, brokers must report both gross proceeds and adjusted cost basis, giving the IRS a far more complete picture. The IRS also mandated an account-by-account cost basis tracking method from January 1, 2025, disallowing the prior universal aggregation approach, a shift that increases record-keeping burdens for DeFi users and multi-wallet traders.
South Korean exchanges, meanwhile, saw combined six-month turnover slump 54.6% year-over-year to $366.58 billion, according to NexBlock data. In July, the five major won-based platforms—Upbit, Bithumb, Coinone, Korbit and Gopax—recorded just 17.34 trillion won in volume, down 16.9% from June. Upbit widened its market share to 67.4% as liquidity concentrated in the largest venue. Finance Minister Koo Yun-cheol confirmed on July 29 that the country’s 22% crypto gains tax (20% national plus 2% local income tax) will take effect on January 1, 2027, taxing annual gains above 2.5 million won (about $1,740). First filings are due in May 2028. With trading activity shrinking, smaller exchanges are exploring institutional partnerships, stablecoin services and regulatory compliance to differentiate themselves.
Together, the developments signal a pivotal moment for crypto taxation and market structure in two major jurisdictions, likely pressuring retail trading behavior globally.
