IRS Introduces DeFi Tax Reporting Requirements

The U.S. Treasury and Internal Revenue Service (IRS) have unveiled new tax reporting requirements aimed at decentralized finance (DeFi) platforms. Starting January 1, 2027, digital asset brokers must report gross proceeds from DeFi transactions using 1099 forms. The move aligns DeFi tax reporting with that of traditional securities brokers, a step officials say will simplify compliance and close tax loopholes.

“These regulations will ensure all taxpayers follow the same rules and make tax filing easier and cheaper for compliant individuals,” stated Aviva Aron-Dine, Acting Assistant Secretary for Tax Policy. While proponents argue this adds much-needed clarity, critics see it as an attempt to centralize oversight of a decentralized ecosystem.

Crypto Community Pushback and Calls for Action

The DeFi community swiftly reacted to the IRS announcement, with industry leaders expressing concern over the regulations’ impact on innovation. Blockchain Association CEO Kristin Smith criticized the rules as a strategy to drive the U.S. crypto industry offshore. "We’re prepared to take aggressive action to fight back," she said, emphasizing the need for collaboration with a pro-crypto Congress.

Alexander Grieve of Paradigm echoed these sentiments, warning that the centralized reporting requirements undermine DeFi’s core principles. Industry advocates hope for a reversal through the Congressional Review Act or intervention by President-elect Donald Trump, who has pledged to overhaul digital asset regulation.

Bitcoin Dips Below $94K Amid Market Uncertainty

Bitcoin’s recent price action has sparked debates among analysts, with the cryptocurrency trading below $94,000 after reaching its all-time high of $108,000 earlier in December. Renowned market analyst Rekt Capital highlighted a critical technical development, noting that “old supports are acting as new resistance,” confirming a breakdown in price structure. However, he emphasized that the follow-through in bearish downside continuation has been limited thus far.

Rekt Capital further pointed out that the $94,250 level on the daily chart is crucial. If Bitcoin loses this support, it could open the door for a drop into the low $90,000 range. Despite these concerns, Bitcoin continues to trade above its 200-day exponential moving average, a level that has historically provided strong support during market corrections. This ongoing tension between technical resistance and support levels leaves traders closely watching Bitcoin's next moves.

Solana Struggles Amid Declining Activity

Solana (SOL) has also faced headwinds, with a 30% drop in weekly decentralized application (DApp) volumes. This decline has raised concerns about the network’s short-term prospects, especially as popular memecoins like Popcat and Dogwifhat report steep losses. Despite this, Solana’s total value locked (TVL) has reached a two-year high, showing that some investors remain committed to the network.

Derivatives data indicate resilience, with Solana’s futures maintaining a neutral-to-bullish premium despite price declines. However, the network must address declining on-chain activity to sustain long-term demand for SOL.

Solana weekly Dapps volumes, USD. Source: DefiLlama

Looking Ahead: Risks and Opportunities for 2025

The crypto industry enters 2025 navigating a complex landscape of regulatory and market challenges. Macroeconomic factors, such as potential U.S. recession risks and Federal Reserve policy shifts, loom large. These external pressures coincide with internal debates over crypto’s evolving relationship with traditional financial markets.

President-elect Trump’s return to the Oval Office could significantly shape the regulatory environment. His pro-crypto stance and appointment of former SEC commissioner Paul Atkins offer hope for a more innovation-friendly approach. However, the success of these efforts will depend on balancing oversight with the industry’s decentralized ethos.

As the market anticipates a new phase of growth, the community’s response to regulatory changes and market dynamics will define the trajectory of digital assets in the years ahead.