The Internal Revenue Service (IRS) postpones the implementation of the crypto tax rules to January 1, 2026, allowing exchanges more time to adapt to the requirements. 

The decision indicates that the tax agency understands the complexities of the new crypto tax rules. It is worth mentioning that the IRS had initially planned to implement the crypto tax reporting rule this year. However, it extended the implementation to January 1, 2026, almost a year from now. 

The extension comes days after the Texas Blockchain Council and Blockchain Association sued the IRS over its plans to tax crypto gains. These organizations contended that the tax regulator overstepped its constitutional bounds by expanding its requirements to the crypto market. 

Features of the New Tax Rules 

Under the tax rules, crypto exchanges must provide the cost basis of digital assets sold on their platforms. The trading platforms are expected to calculate users’ gains and losses incurred through the sale of digital assets. 

Notably, the default accounting method for this calculation is FIFO (First In, First Out). This method assumes that the first units of crypto purchased are the first to be sold, potentially leading to a surge in taxable gains. 

Expectedly, concerns about the FIFO method have been raised, with taxpayers indicating it could result in inflated tax bills. Cointracker’s head of tax, Shehan Chandrasekera, shared this sentiment among several crypto stakeholders.

Cause and Benefit of the Extension 

This postponement was driven by several factors, particularly inadequate preparation on the path of exchanges, the need for better regulatory clarity, and technological complexity in terms of implementation. 

Notably, the postponement offers enormous benefits for both investors and brokers. Brokers now have sufficient time to develop the necessary systems to track the cost basis of digital assets sold on their platforms. 

On the other hand, investors can choose other accounting methods, such as HIFO (Highest In, First Out) or Specific Identification (Spec ID), instead of FIFO. 

Additional Measures to IRS Crypto Tax Rule  

Since the IRS introduced the tax requirement, it has added new measures to strengthen its tax regulation on crypto. It implemented a new tax regime for crypto transactions in June 2024. However, it postponed the requirement for non-custodial wallets and decentralized finance (DeFi). 

Two months later, the regulator released the updated version of the 1099-DA tax form. This enhances users’ privacy and simplifies the reporting of crypto transactions. 

Last month, the IRS finalized the tax rule for DeFi brokers, mandating these platforms to follow similar reporting obligations as traditional brokers. Also, it maintained its stance on tax gains obtained through crypto staking despite legal actions filed to stop this from happening. 

Cybersecurity outfit Kaspersky warns of new crypto scam making the rounds on YouTube.

From protocols to project founders and individual retail investors, bad actors have spared no one in their pursuit to rip off crypto market participants.

In the latest instance, these bad actors appear to be targeting even their fellow thieves.

A Honey Trap of Sorts?

Prominent cybersecurity outfit Kaspersky has warned of a new crypto scam mainly making the rounds on YouTube. As highlighted by the security outfit, the latest scam is unique as the scammers appear to be targeting fellow unscrupulous elements.

The scammers target their victims by pretending to be helpless crypto novices in YouTube comments. The scammer shares their wallet seed phrases, claiming to have USDT in their wallet but not knowing how to transfer it. 

Theoretically, this sounds like the easiest score ever for any aspiring thief or nefarious passerby, especially when they use the seed phrases to open the wallet and find about 8,000 USDT on the Tron network for the taking, needing only a few dollars in TRX tokens for fees, as seen by Kaspersky in one instance. 

There is a catch, however. The wallet in question is a multi-signature wallet that requires permission from two or more other wallets to send transactions.

So when the wannabe thieves turned victims send TRX to the account for gas fees, they will likely find that they can still not move the USDT. But before they might even be able to come to this conclusion, they find that the TRX they sent is immediately sent out to another wallet, the scammer’s wallet.

The latest scam brings to mind the honey trap, a technique used to siphon information from a victim by manipulating their sexual or romantic desire. In this case, however, scammers are banking on human greed.

As highlighted by Kaspersky, regular crypto investors can easily stay safe from this scam by not trying to access other people’s crypto wallets.

Do Kwon, co-founder of Terraform Labs Pte., pleaded not guilty to U.S. fraud charges linked to the $40 billion collapse of the TerraUSD stablecoin. 

Kwon entered his plea before U.S. Magistrate Judge Robert Lehrburger in Manhattan and agreed to remain in custody without bail. The 33-year-old former crypto executive faces nine criminal charges, including wire, securities, and commodities fraud.

The charges stem from allegations that Kwon misled investors about the Terra blockchain’s technology and adoption levels. His court appearance in New York concluded a prolonged legal battle between the U.S. and South Korea over extradition rights. Authorities in Montenegro arrested Kwon in March 2023 for attempting to travel using a falsified passport, triggering extradition requests from both nations.

Legal Drama Spanning Multiple Jurisdictions

Kwon made a U.S. court appearance upon his arrest in Montenegro alongside Terraform’s former chief financial officer, who was also arrested at the same time. Both individuals were apprehended for attempting to board a private jet bound for Dubai using fake documents. After their arrest, Montenegro sentenced them to four months for document forgery.

Meanwhile, New York and Seoul prosecutors filed charges related to Terraform’s collapse in 2022. The implosion of TerraUSD, an algorithmic stablecoin, and its companion token, LUNA, had devastating effects on the crypto market.

LUNA’s value plummeted from over $100 to nearly zero, causing significant investor losses. The downturn contributed to broader market instability.

Kwon’s extradition was finalized on December 28, 2024, when Montenegro’s Minister of Justice approved the U.S. request. Although South Korea sought custody of Kwon, Montenegro opted to send him to the U.S., citing its strong security partnership with the nation. Notably, Kwon had argued for extradition to South Korea.

Broader Fallout and Related Legal Actions

In addition to the criminal charges, Kwon faced civil actions from the U.S. Securities and Exchange Commission (SEC). A jury found Kwon and Terraform liable for fraud in 2024, leading to a $4.47 billion settlement agreement. However, Terraform Labs subsequently filed for bankruptcy, complicating the settlement’s enforcement.

The Manhattan U.S. Attorney’s Office will handle Kwon’s prosecution, adding him to a growing list of major cryptocurrency figures facing legal action. This includes FTX co-founder Sam Bankman-Fried, who received a 25-year prison sentence after being convicted on fraud charges. The next hearing in Kwon’s case is scheduled for January 8.