Treasury and IRS name digital assets in a review of ETF tax strategies
The Treasury Department and the IRS have named digital assets in a review of ETF structures that may keep gains outside a key tax qualification test.
Why it matters
Fund sponsors may need to rethink redemption baskets before Treasury decides whether existing law already reaches them, CryptoSlate said, and the review carries a live possibility of additional rules or enforcement rather than guidance alone. Separately, the 1099-DA cost basis gap means a broker can only report cost basis for assets bought on its own platform, so positions opened elsewhere reach taxpayers with no purchase price on file.
Key facts
The Treasury Department and the IRS identified digital assets as an area where fund managers may be stretching tax provisions beyond their intended purpose.
Reported by CryptoSlate
Treasury Secretary Scott Bessent said on X that the agencies are 'serious about cracking down on transactions designed to dodge taxes or exploit our federal tax code.'
Reported by CryptoSlate
Treasury did not challenge conventional in-kind ETF redemptions and instead directed its concern at structures that use that machinery.
Reported by CryptoSlate
The SEC approved in-kind creations and redemptions for spot crypto exchange-traded products last year, saying the change could reduce costs and price slippage.
Reported by CryptoSlate
Starting with the 2025 tax year, digital asset brokers, exchanges, certain custodial wallet providers and some payment processors are required to track and report gross proceeds from digital asset sales for their customers.
Reported by The Crypto Basic
Cost basis reporting on Form 1099-DA phases in the year after gross proceeds reporting begins.
Reported by The Crypto Basic
An exchange can report only the cost basis it holds, so an asset bought on a different platform has no purchase price on file for the reporting exchange.
Reported by The Crypto Basic
What happened
The Treasury Department and the IRS identified digital assets as one area where fund managers may be stretching tax provisions beyond their intended purpose, according to CryptoSlate, which said the notice opens the door to new rules or enforcement. Treasury Secretary Scott Bessent said on X that the agencies are 'serious about cracking down on transactions designed to dodge taxes or exploit our federal tax code.' Treasury stopped short of challenging conventional in-kind ETF redemptions and instead focused on structures that use that machinery, which CryptoSlate said could complicate how funds package crypto exposure while preserving favorable RIC treatment. The machinery itself was approved last year, when the Securities and Exchange Commission allowed in-kind creations and redemptions for spot crypto exchange-traded products and said the change could reduce costs and price slippage; CryptoSlate's headline put the scale of the resulting plumbing market at $7 billion. The Crypto Basic reported separately on the IRS's Form 1099-DA, which requires digital asset brokers, exchanges, certain custodial wallet providers and some payment processors to report gross proceeds from digital asset sales starting with the 2025 tax year, with cost basis reporting phasing in the following year. It is not settled whether Treasury will write new rules or treat existing law as already reaching the structures it flagged.
How the story developed
- First report
First report by The Crypto Basic
Understanding the 1099-DA: What Crypto Businesses Actually Need to Know Before It Hits
- Update
Gross proceeds reporting under Form 1099-DA takes effect for the 2025 tax year
Digital asset brokers, exchanges, certain custodial wallet providers and some payment processors are required to report gross proceeds from digital asset sales.
- Update
Cost basis reporting phases in the year after gross proceeds reporting
The Crypto Basic reported that the follow-on phase of Form 1099-DA covers cost basis.
- Independent corroboration
Independently corroborated by CryptoSlate
A $7 billion crypto ETF plumbing boom just ran into the IRS
- Official statement
SEC approves in-kind creations and redemptions for spot crypto exchange-traded products
The approval let spot crypto funds use in-kind machinery long standard for traditional funds; CryptoSlate reported the SEC said it could cut costs and price slippage.
- Update
Treasury and the IRS name digital assets in a review of fund tax structures
The agencies flagged digital assets as an area where managers may be stretching tax provisions beyond their intended purpose, opening the door to new rules or enforcement.
- Official statement
Bessent posts on X that the agencies are serious about cracking down on tax-avoidance transactions
CryptoSlate quoted the Treasury Secretary's post as framing the notice as part of a broader push against tax-motivated investment strategies.
How coverage built up
Independent sources over time, counted the way the consensus panel counts them: a republication of a wire story does not move the line.
- 29 Sept 2026, 15:15 UTC: The Crypto Basic — 1 independent source, 1 reports
- 29 Sept 2026, 15:51 UTC: CryptoSlate — 2 independent sources, 2 reports
Affected entities
Also mentioned: United States
Original sources
| Publisher | Report | Role | Published |
|---|---|---|---|
| The Crypto Basic Crypto media | Understanding the 1099-DA: What Crypto Businesses Actually Need to Know Before It Hits | Original | |
| CryptoSlate Crypto media | A $7 billion crypto ETF plumbing boom just ran into the IRS | Independent |
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