• The IRS delays new crypto tax rules until December 31, 2025, granting exchanges time to adapt and easing investor concerns over higher tax burdens.
• Legal challenges against the IRS highlight concerns over reporting requirements, arguing the rules impose undue burdens on crypto market participants.

The Internal Revenue Service (IRS) has postponed the implementation of new cryptocurrency tax reporting requirements until December 31, 2025. The decision, announced on Wednesday, provides centralized exchanges and brokers more time to adapt to the regulations while offering temporary relief to digital asset investors concerned about potential tax increases.

Under the delayed rules, centralized cryptocurrency exchanges would have been required to adopt the First In, First Out (FIFO) accounting method for capital gains calculations. FIFO assumes that the earliest acquired assets are sold first, often leading to higher taxable gains, especially in a bull market.

Tax experts had warned of significant implications for investors. Shehan Chandrasekara, Head of Tax Strategy at CoinTracker, noted that FIFO could unintentionally force the sale of assets with the lowest cost basis, resulting in higher capital gains.

“In a bull market environment, this could have been disastrous for many taxpayers,” Chandrasekara explained, highlighting the potential for inflated tax bills.

With the delay, investors retain the option to use alternative accounting methods such as Highest In, First Out (HIFO) or Specific Identification (Spec ID), which provide greater flexibility in managing tax liabilities. However, beginning January 1, 2026, investors must choose an accounting method or default to FIFO.

The IRS’s decision also comes amid mounting legal and industry challenges to its cryptocurrency tax regulations. Lawsuits filed by the Blockchain Association and the Texas Blockchain Council argue that the IRS overstepped its authority by mandating brokers to report all digital asset transactions, including those on decentralized exchanges. Critics contend that such requirements place undue burdens on the crypto market and its participants.

Editorial Note: This news article has been written with assistance from AI. Edited & fact-checked by Harshajit Sarmah.