When you sell Bitcoin, swap Ethereum for Solana, or cash out an airdrop, you might have triggered a cryptocurrency capital gains, a taxable event that occurs when you sell or trade crypto for more than you paid. Also known as crypto profit, it’s not just a technical term—it’s money the IRS and other tax agencies want a cut of. This isn’t theoretical. In 2024, the SEC fined Terraform Labs $4.68 billion—not for hacking, but for hiding profits and misleading investors. That’s the same kind of profit they’re tracking in your wallet.
Most people think if they don’t cash out to fiat, they’re safe. Wrong. Trading one crypto for another? That’s a taxable sale. Buying a coffee with Dogecoin? Taxable. Even giving crypto as a gift can trigger reporting. The SEC crypto enforcement, the agency’s growing focus on tracking unreported crypto transactions means exchanges now report user activity. Platforms like Coinbase and Kraken send 1099 forms. If you traded on a decentralized exchange like Uniswap or LFJ v2.2, you’re still responsible. No one’s watching your wallet for you.
And it’s not just the U.S. Singapore requires all exchanges to be licensed under MAS rules, which include full transaction tracking. New Zealand’s Dasset collapsed after failing to meet compliance standards. The crypto exchange compliance, the legal requirement for platforms to log, report, and verify user trades is now global. If you’re holding crypto, you’re in the system.
You don’t need to be a trader to be affected. If you bought $500 of crypto in 2020 and sold it for $3,000 in 2024, you owe tax on $2,500. If you mined Bitcoin, staked tokens, or earned interest from DeFi, those are income events—separate from capital gains, but still taxable. The crypto profit reporting, the process of documenting every trade, swap, and transfer for tax purposes isn’t optional. The tools are out there: Koinly, CoinTracker, ZenLedger. But you still have to input the data. No app can guess your trades.
And here’s the kicker: if you lost money? You can deduct losses—but only if you documented everything. The NFT market crash in 2022 wiped out billions, but most people never claimed those losses because they didn’t track their buys and sells. Same goes for tokens like GORK or DRAGONKING that dropped 98%. If you bought and sold, you had a capital loss. That’s money you could’ve saved on taxes.
What you’ll find below are real cases: how miners reacted after Bitcoin’s halving, why exchanges like Nanex shut down over compliance failures, and how airdrops like the Impossible Finance x CoinMarketCap one had legal strings attached. You’ll see what happens when people ignore capital gains—and what you need to do to stay clear of fines, audits, or worse.
Form 8949 is the IRS form you must use to report all cryptocurrency sales and trades. Starting in 2025, exchanges will send new tax forms, but you still need to track your own cost basis. Learn what to report, how to avoid penalties, and how to prepare.