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The Clarity Act aims to create clear and enforceable rules for the U.S. crypto industry. It marks a move away from regulation by enforcement and toward a more structured market framework. Yet tax reporting remains a major obstacle.
The Clarity Act seeks to define market structure more clearly. It also gives the crypto industry a more coherent regulatory perimeter. Supporters view that shift as a major step for the sector.
At the same time, the bill introduces strict record-keeping duties. Those rules require audit trails that prove customer asset segregation. They also aim to reduce the risk of commingling funds.
According to a recent report, those safeguards matter for retail users. It also links them to lessons from early crypto collapses. Still, the operational burden remains heavy for firms that must track assets in real time.
Form 1099-DA is designed to improve transparency and compliance. Crypto brokers must issue it, and it asks for asset counts, acquisition dates, sale dates, and disposal dates. It also includes separate sections for stablecoins and NFTs.
Even so, the form can leave gaps in reporting. Some forms show proceeds without a reliable cost basis. Others fail to capture holding periods correctly. Non-custodial activity also falls outside the system.
That creates a fragmented tax picture for users. Retail investors may need to reconcile thousands of transactions across exchanges, wallets, bridges, and DeFi protocols. In many cases, the data does not match what the IRS receives.
When assets move between platforms, cost basis data can disappear. The receiving exchange often cannot rebuild the original purchase record. As a result, the system does not match the way crypto ownership works across networks.
The report says the burden then shifts to the taxpayer. Users must reconstruct their full transaction history. If they get it wrong, they face audit exposure and possible compliance problems.
The issue also affects smaller firms. The Clarity Act includes a de minimis exemption for low-volume brokers and dealers. That relief may protect the smallest startups, but it leaves mid-sized firms with steep technical costs.
Read More: CLARITY Act Hits Senate Roadblock as Crypto Bill Faces New Challenges
Other jurisdictions are also shaping their rules. The OECD’s Crypto-Asset Reporting Framework, or CARF, takes a standardized data approach across platforms. It does not assume that intermediaries can rebuild perfect cost basis histories for every user.
The broader policy gap remains. Federal rules now support innovation and a clearer market structure. Yet tax reporting still expects a level of precision that fragmented crypto activity cannot always deliver.
The Clarity Act brings long-awaited regulatory clarity to the U.S. crypto market, but tax reporting remains a major challenge. Form 1099-DA, missing cost basis data, and complex compliance rules continue to burden users, raising questions about whether current tax policy can support broader crypto adoption.
