Several of my clients are tax and audit practitioners operating small- and medium-sized compliance and advisory firms. In view of the forthcoming policy changes signaled by the incoming administration, here is a synopsis of some of the inquiries I have received from this audience in recent weeks:
Following the inauguration of President Trump on Monday, how do you think the pace of crypto legislation will be impacted in the coming months? In what ways?
President Trump’s administration has historically taken a mixed stance on cryptocurrencies, emphasizing concerns about their use in illicit activities while also hinting at their economic potential. With his return to office, we can expect a deliberate but likely accelerated pace of crypto legislation, driven by the dual goals of strengthening consumer protections and solidifying the U.S. as a leader in financial innovation.
Key areas of legislative focus may include:
1. Stablecoin Regulation: Given bipartisan interest in regulating stablecoins as a bridge between traditional and digital finance, we may see proposals for a robust regulatory framework requiring reserves and audits.
2. Tax Policy Clarification: Building on the IRS’s increased attention to crypto, Congress might address basis tracking, transaction reporting thresholds, and tax treatment for staking and mining.
3. Support for Blockchain Innovation: To stimulate economic growth, the administration could introduce incentives for blockchain development and clarify the legal status of smart contracts.
These developments could usher in clearer guidance for CPAs, easing compliance challenges for taxpayers while creating new advisory opportunities in tax planning, risk management, and blockchain implementation.
Now that the IRS released its final regulations on DeFi tax reporting, what challenges will brokers and taxpayers face?
The IRS’s final regulations on DeFi (decentralized finance) tax reporting mark a significant step toward standardizing compliance, but they bring complex challenges for both brokers and taxpayers.
1. Basis Calculation: Many DeFi transactions involve token swaps, liquidity pooling, and staking, which can trigger taxable events with fluctuating values. Accurately computing basis for these transactions, particularly when tokens are held across multiple wallets or exchanges, will remain a significant challenge.
2. Fair Market Value Determination: Establishing FMV in a volatile market with thin liquidity for certain tokens adds uncertainty, especially when price discrepancies exist across platforms.
3. Audit Risk: Without precise transaction data, the risk of discrepancies between taxpayer reporting and third-party information statements (e.g., Forms 1099) increases, heightening the likelihood of audits. For CPAs, this means greater demand for advisory services related to tracking and reconciling crypto transactions, implementing portfolio tracking systems, and preparing for potential disputes with tax authorities. However, firms that fail to invest in staff training or crypto-specific technology risk reputational and financial exposure.
What benefits do you see crypto creating for the accounting profession?
Crypto presents significant benefits for the accounting profession, creating both revenue opportunities and challenges that could ultimately elevate the profession’s role in a rapidly evolving financial landscape.
1. Advisory Revenue Growth: As businesses and individuals increasingly adopt crypto, CPAs can provide valuable services in tax planning, compliance, and risk management. These services will become even more essential as regulations tighten and the complexities of reporting grow.
2. Blockchain Audits: Blockchain’s potential for transparency could transform auditing. While smart contracts may simplify certain processes, they also require auditors to assess code functionality and verify off-chain data integrations. This will necessitate a new skill set within the profession.
3. Business Model Innovation: The emergence of decentralized autonomous organizations (DAOs) and tokenized assets opens doors for CPAs to consult on governance structures, token issuance, and financial reporting in these novel entities. However, the profession faces risks. Firms must proactively invest in technology and training to remain competitive. Failure to adapt could leave firms ill-equipped to meet client expectations or regulatory demands, particularly in areas like DeFi tax reporting and smart contract audits.
Conclusion
While crypto’s complexity can create compliance headaches, the industry’s continued maturation—especially under clearer legislative and regulatory frameworks—offers transformative potential. As blockchain use cases finally gain traction, CPA firms that position themselves as experts in crypto compliance, auditing, and advisory services stand to benefit significantly. The challenge will be striking the right balance between capturing this revenue potential and mitigating the risks of underinvestment in the required expertise and technology.
