Tokenized Stocks Highlight Significant Gaps in Crypto Tax Reporting

The global landscape of crypto tax reporting is plagued by significant deficiencies, and the rise of tokenized stocks may be the catalyst for much-needed change. Recently, prominent platforms such as Robinhood and Gemini have begun offering tokenized stocks to users within the European Union, allowing for 24/7 trading of blockchain-based derivatives that mirror the prices of actual equities like Apple and Tesla, unencumbered by traditional market hour limitations. This development may seem like a significant step forward in terms of accessibility and innovation. However, as these products gain popularity, regulators will face mounting pressure to address the glaring gap in tax reporting between crypto platforms and traditional brokers. Despite the progress made by the crypto industry over the years, tax reporting for crypto assets remains significantly behind that of traditional assets in many parts of the world. A notable example is Australia, where the Australian Stock Exchange provides the tax office with detailed, structured data, including sale prices, dates, and proceeds, which is then automatically pre-filled into users' tax returns. In contrast, the approach to crypto tax reporting is less rigorous, with the Australian Tax Office relying on notifications reminding users to check for taxable events rather than providing detailed, pre-filled reports. This disparity may have been justifiable in the early days of crypto, when most activity was centered around speculative tokens or NFTs. However, with the anticipated global expansion of tokenized stocks, the lack of tax transparency becomes increasingly difficult to justify. Governments cannot afford to overlook potential tax revenue simply because transactions are occurring on blockchain. As tokenized stocks gain more attention, regulators will likely scramble to prepare. In the United States, the IRS is taking steps to catch up, introducing new crypto reporting rules, including Form 1099-DA, set to take effect in 2026, which will require crypto brokers to report user transactions in a manner similar to traditional financial institutions. Meanwhile, Robinhood is reportedly preparing to launch tokenized stocks for U.S. customers, raising questions about whether this rollout will coincide with the new IRS requirements. On a global scale, the OECD's Crypto-Asset Reporting Framework, also due in 2026, will enforce the sharing of transaction data across jurisdictions, similar to the Common Reporting Standard for banks. If tokenized stocks are to mirror real equities, then the tax data reporting surrounding them must also align accordingly. The era of crypto operating in a regulatory gray area is drawing to a close. Whether platforms are prepared or not, the age of full tax transparency is approaching, and tokenized stocks may be the turning point that brings this reality into focus. It is anticipated that this moment of reckoning will arrive within the next five years.