The Clarity Act won’t lead to adoption without crypto tax reform
The legislation is being framed as a turning point for U.S. crypto policy, but there’s a major piece of the puzzle being overlooked, argues Singh.
But regulatory clarity does not automatically lead to adoption. Because even if Congress gets the market structure right, the U.S. crypto tax framework, in its current form, is still a bit messy and complicated.
Form 1099-DA is confusing for crypto investors
On paper, Form 1099-DA, which any business defined as a crypto broker must issue, is about transparency, standardized reporting and improved compliance.
The Form 1099-DA asks crypto users for the number of assets, acquisition date, sale and disposal date, as well as specific sections for aggregated transactions for stablecoins and NFTs.
However, it is becoming more counterproductive than intended. Crypto users are now receiving tax forms that often report proceeds without a reliable cost basis, fail to properly capture holding periods and excludes non-custodial activity entirely. The result is a fragmented and incomplete picture of a user’s actual tax position.
For retail investors, that means manually reconciling thousands of transactions across exchanges, wallets, bridges and DeFi protocols, often with conflicting data that does not align with what the IRS receives.
Even within the industry, the problem has become immense. When assets are moved between platforms, the cost basis often disappears. The receiving exchange has no reliable way to reconstruct historical purchase data. Yet, the system is designed as if crypto can be reported with the same precision as traditional securities held within a single brokerage account.
It cannot. So the burden falls back to the individual taxpayer. They are now expected to override, reconcile and reconstruct their entire transaction history, or risk audit exposure if they get it wrong.
The audit trail and record-keeping requirements in the Clarity Act represent a necessary trade-off for regulatory certainty under the CFTC, but the operational hurdles they impose can’t be ignored.
To the bill’s credit, the underlying intent of these strict mandates is a massive win for the industry. Forcing audit trails to definitively prove the absolute segregation of customer assets injects a level of trust and security that will protect retail users and prevent the catastrophic commingling of funds that defined early crypto collapses.
