IRS Introduces Temporary Relief for Cryptocurrency Holders Using CeFi Brokers in 2025
The United States Internal Revenue Service (IRS) has introduced a temporary relief measure to address potential tax challenges for cryptocurrency holders using centralized finance (CeFi) brokers in 2025. This relief comes in response to the implementation of Section 6045 custodial broker regulations, which are set to take effect on January 1, 2025.
According to Shehan Chandrasekera, Head of Tax Strategy at CoinTracker, these regulations will require CeFi brokers to report cryptocurrency transactions and apply specific accounting methods for asset sales. If holders do not choose a preferred accounting method, brokers will default to First In, First Out (FIFO), potentially increasing tax liabilities for investors.
To alleviate this issue, the IRS has issued Notice 2025-7, providing temporary relief for cryptocurrency sales conducted on CeFi exchanges between January 1 and December 31, 2025. This relief allows taxpayers to specify which assets are being sold, bypassing the default FIFO method and offering greater flexibility during this transitional period.
While no immediate action is required from taxpayers, starting January 1, 2026, CeFi users must select an accounting method with their brokers to avoid defaulting to FIFO. It is recommended that taxpayers maintain detailed records or use reputable crypto tax software to ensure accurate reporting and alignment with their chosen accounting methods.
This development follows the recent introduction of a broker reporting rule under the Infrastructure Investment and Jobs Act, which controversially expands broker definitions to include decentralized finance (DeFi) platforms. This rule requires platforms to report transactions despite their decentralized nature, leading to legal challenges from industry stakeholders.
Overall, the IRS’s temporary relief measure aims to provide clarity and flexibility for cryptocurrency holders using CeFi brokers, ensuring smoother tax compliance during this period of regulatory change.
