The U.S. Internal Revenue Service (IRS) has offered a temporary reprieve to cryptocurrency holders by delaying a contentious tax rule that would have defaulted centralized exchange users to the FIFO (First In, First Out) cost-basis accounting method. This decision, effective until December 31, 2025, provides crypto investors and brokers additional time to adapt to evolving regulations.

Previously, the IRS announced that unless investors explicitly selected accounting methods like HIFO (Highest In, First Out) or Spec ID, brokers would default to FIFO. FIFO assumes the oldest assets purchased are sold first, which often results in higher taxable capital gains. This rule sparked criticism, as it could inadvertently burden taxpayers, especially during bull markets, by prioritizing the sale of low-cost-basis assets and amplifying capital gains.

Tax experts and crypto commentators applauded the postponement. Shehan Chandrasekera, head of tax at Cointracker, noted that enforcing FIFO immediately could have had "disastrous" implications for crypto taxpayers. Similarly, Mark Thomas highlighted that while FIFO might benefit some in specific scenarios, such as long-term holdings, it poses significant challenges for others.

The Blockchain Association and the Texas Blockchain Council recently filed a lawsuit against the IRS, arguing that expanded reporting requirements for digital asset transactions are unconstitutional. These requirements, set to take effect in 2027, will mandate brokers to disclose taxpayers' details and report gross proceeds from digital asset sales, including those on decentralized exchanges (DEXs).

For now, crypto investors can maintain their own cost-basis records while brokers prepare to support diverse accounting methods. This delay offers temporary relief but underscores the growing complexities of crypto taxation in a rapidly evolving regulatory landscape.