The cryptocurrency exchange industry is undergoing a significant transformation as new regulations and market dynamics reshape the sector in 2025. From increased compliance requirements to evolving user demands, coin exchanges are adapting to a rapidly changing environment.
IRS Form 1099-DA Ushers in New Era of Tax Reporting
Starting in 2025, centralized cryptocurrency exchanges must comply with the new IRS Form 1099-DA, marking a pivotal shift in tax reporting requirements[1]. This change is expected to generate an unprecedented 8 billion new forms annually, significantly increasing the volume of information returns processed by the IRS[1].
The implementation of Form 1099-DA follows a phased approach:
- For 2025 transactions, exchanges must report gross proceeds from digital asset sales.
- Starting with 2026 transactions, cost-basis tracking for every asset bought and sold on custodial broker platforms becomes mandatory[1].
Wendy Walker, VP of Regulatory Affairs at Sovos, explains: “The government knows centralized exchanges can report gross proceeds– many of them were reporting gross proceeds on Form 1099-K until the new 1099-DA regulations were released. So that’s why this year, for 2025, exchanges are required to report gross proceeds amounts, and they get another year to report the cost basis details for transactions in 2026.”[1]
Global Regulatory Frameworks Emerge
The regulatory landscape for coin exchanges is not limited to the United States. The Organisation for Economic and Cooperative Development (OECD) has introduced the Crypto-Asset Reporting Framework (CARF), aimed at facilitating transparent reporting of crypto-asset-related transactions between tax authorities[1]. In response, European Union member countries have adopted DAC7 and DAC8 to ensure regional exchanges’ compliance with these new standards[1].
State-Level Reporting Requirements Add Complexity
Individual states within the U.S. are developing their own crypto tax reporting requirements, adding another layer of complexity for coin exchanges[1]. The inclusion of state income tax and withholding boxes on the new Form 1099-DA signals the IRS’s intention to share this information with participating states in the Combined Federal State Filing (CF/SF) program[1].
Implementation Challenges for Exchanges
Coin exchanges face several core implementation challenges as they navigate this new regulatory environment:
Volume Management: The fractional nature of cryptocurrency trades results in exponential transaction volumes compared to traditional stock and bond trading[1].
Identity Verification: Managing the collection and processing of Forms W-8 and W-9 presents significant challenges in customer identity verification[1].
Cost-Basis Tracking: Beginning in 2026, exchanges must implement systems to track the purchase and sale dates of assets to determine cost-basis and calculate gains and losses for tax purposes[1].
Market Dynamics and New Entrants
While established exchanges grapple with regulatory changes, new players are entering the market with innovative approaches. DTX Exchange, for example, has garnered attention by combining blockchain transparency with institutional-grade tools[2]. With over 700,000 holders during its ICO phase, DTX Exchange is set to launch at $0.36, offering a hybrid model that allows users to trade ETFs and forex with crypto-like speed[2].
Regulatory Shifts Under New Administration
The cryptocurrency industry is experiencing a significant shift in regulatory strategy under the Trump administration. The SEC’s recent voluntary dismissal of appeals related to the “Dealer Rule” signals a change in approach to cryptocurrency regulation[3]. Acting SEC Chairman Mark Uyeda has launched a crypto task force led by Commissioner Hester Peirce, focusing on developing a comprehensive and clear regulatory framework for crypto assets[3].
Looking Ahead: Potential Legislative Developments
Industry experts anticipate potential legislative developments that could further impact coin exchanges:
- A market structure bill that could rewrite securities law to give crypto tokens more regulatory clarity[5].
- A stablecoins bill, which the Trump administration is prioritizing to uphold the dominance of the dollar[5].
David Shapiro, a cryptocurrency legal expert, predicts that the passage of a stablecoin bill could bring fresh institutional interest to the crypto market: “I’m sure all of the banks would like to do this and compete with Tether, but there’s not enough regulatory clarity. So once Congress has the stablecoin bill, that’ll probably bring a lot of money in.”[5]
As the regulatory landscape continues to evolve, coin exchanges must remain agile and proactive in adapting to new requirements while meeting the growing demands of users in an increasingly complex market.