Transcription
2025 is a transitional year internationally for how cryptocurrencies are being taxed. The transition has to do with each country demanding more information reporting from crypto exchanges. This would be end-of-year reporting about how much your movements and sales were.
But also, most of them are asked under the EU MiCA regulations and under the US broker-dealer regulations reporting individual transactions. So, not just bottom-line amounts, but every single transaction. So, anytime that you sell or swap out, exchange if you will, is going to be reported. Also, anytime you do a transfer, it's going to be reported.
We do a transfer, it's going to report, and this is somewhat true for the EU MiCA regulations. It's going to report the transfer-in or transfer-out addresses that were used. So, this starts to give the tax authorities, the IRS, insight into where some of your other addresses are. Over time, this is going to become more and more difficult to hide from the tax authorities. It's going to be inevitable that they're going to be capturing this information.
What can they do with this information? They can start to build a portfolio analysis where they can start with one address and they can start to see what addresses interacted with that address. And this would all be for one particular, you know, coin or token. And then start to track, you know, one type of blockchain, I should say, you know, what other addresses are connected to it, what movements are happening between those addresses, which of these addresses are exchanges, private wallets. And then you can start to build a whole picture of movements of coins between different addresses.
They then use a mathematical technique. It's basically called a graphing technique where they look at relationship patterns, and they can determine with this technique pretty well when an address is a non-personal address. There are certain behaviors, transfer behaviors that happen if it's your own personal, like ledger address versus somebody else's ledger. Like if you're paying somebody, you ship it to a private address. You know, there's patterns that occur, and they have identified and mapped these patterns. For example, if you're sending it to somebody else, it's probably a one-time event or limited-time event. It's always one direction. If it's a hardware wallet, there's in and out happening. Also, you're leaving assets on the hardware wallet for extended periods of time. These are characteristics of a private wallet. So, they can use these types of graphing mathematical analysis techniques to get a picture of how much you have.
The IRS described this in great detail in the indictment on Roger Ver and what they did with Bitcoin to track his holdings and where they were. The problem with this is you have to do it for every single coin and token that the person is using. So, there's a lot of applications that are involved. There's not really any commercial applications to my knowledge that are doing this. This is clearly something that governments would be moving towards.
As they start to get more tax reporting information, they're going to start getting for U.S. persons in January of 2026. The IRS will start receiving 1099-DA forms from the brokerages and exchanges that you use for digital asset movement in the U.S. So, it's going to start to paint a picture over time. It'll be very hard to manage that if you're a person who's trying to live under the radar, so to speak. You'd have to be very structured in how you do things.
But again, with this graphing analytical view, they can come back and start to identify links. You can run, but you can't hide, so to speak. So, everybody start to realize that technology is moving in towards the IRS's hands and other tax authorities' hands, and it's time to be compliant with your crypto reporting and make this the year as you go into 2026. Set aside the money to pay your taxes and start to get compliant.
So, I wish you the best. Please like, subscribe, and follow. It means a lot to help us get this message out. Thank you. [Music]