So, you’ve cut ties with centralized exchanges (CEXes). No Coinbase. No Binance. No Kraken. Just a slick wallet, a few DEX trades, maybe a little yield farming — and a sense of freedom.
But here’s the question every self-custody user needs to ask:
Do I still have to pay taxes if I never touch an exchange?
Spoiler alert: Yes, you do.
Whether you’re swapping tokens on-chain, collecting NFTs, or earning from staking directly in your wallet — the IRS still expects a full report. In 2025, crypto tax law is more aggressive than ever, and flying under the radar isn’t as easy as it used to be.
Let’s break down how crypto taxation really works even without an exchange, and what you need to do to stay out of trouble.
Understanding the IRS View on Crypto in 2025
Let’s start with the basics — what the IRS actually cares about when it comes to crypto.
Spoiler: it’s not where you do your trading. It’s what you’re doing with your assets.
What Counts as a Taxable Event?
Here’s the golden rule: If your crypto increases in value and you dispose of it, you’ve got a tax event.
You don’t need to “cash out” to USD for the IRS to care. In fact, most taxable events happen without ever touching a centralized exchange.
Examples of taxable events:
- Trading one token for another (e.g., ETH → DAI on Uniswap)
- Spending crypto (like buying a domain with BTC)
- Receiving crypto as income (airdrops, freelance payments, staking rewards)
- Selling an NFT
Not taxable:
- Holding your crypto
- Transferring between wallets you own
- Buying crypto with USD (unless using margin)
IRS Form 8949 and the Digital Asset Question
If you’re filing a tax return in the U.S., you’ll notice a simple but powerful question on Form 1040:
“At any time during [tax year], did you receive, sell, exchange, or otherwise dispose of any digital asset?”
That includes:
- DeFi activity
- Peer-to-peer trades
- On-chain swaps
- DAO earnings
- NFT flips
It doesn’t matter where it happened. If it happened at all, you’re expected to disclose and calculate your gains or losses on Form 8949.
Table: Crypto Events That Trigger Taxes (Exchange or Not)
| Activity | On Exchange? | Taxable? | Notes |
|---|---|---|---|
| Buy ETH with USD | ❌ | ❌ | Not taxable unless using leverage/margin |
| Swap ETH for DAI on Uniswap | ❌ | ✅ | Treated as disposal of ETH, taxable gain/loss |
| Receive payment in USDC (freelance) | ❌ | ✅ | Treated as income at fair market value |
| Stake crypto and earn rewards | ❌ | ✅ | Taxable when received, even before selling |
| Send BTC to your hardware wallet | ❌ | ❌ | Not a taxable event if ownership doesn’t change |
| Sell an NFT | ❌ | ✅ | Gain/loss reported on Form 8949 |
Off-Exchange Crypto: What the IRS Still Wants to Know
Think skipping exchanges means you’re invisible? Not quite. The IRS doesn’t care where your crypto transactions happen — they only care that they happen.
Even if you never touch Coinbase, Gemini, or Kraken, your on-chain activity is still fair game for taxation. Let’s look at the types of crypto transactions that still count, even without a centralized exchange involved.
Peer-to-Peer Trades Are Still Reportable
Maybe you swapped ETH for some obscure altcoin directly with a friend, no platform involved. That might feel like a backroom handshake — but the IRS sees it differently.
Any P2P trade — no matter how casual — is treated as a disposition of property. That means:
- You owe capital gains (or losses) on the coin you traded away
- You report the market value of what you received at the time of the trade
- You need to know your cost basis (what you originally paid) for accurate reporting
Yes, even if there’s no third-party involved and no KYC — it’s still taxable.
DeFi, NFTs, and DEXes: Decentralization Doesn’t Mean Tax-Free
Let’s say you:
- Used Uniswap or SushiSwap to swap tokens
- Bridged your assets to another chain
- Provided liquidity to an AMM and earned yield
- Bought or sold NFTs
- Used a DAO wallet or multisig for treasury management
Guess what? The IRS still expects you to:
- Track your activity
- Report every taxable event
- Calculate cost basis and fair market value
Even “gasless” swaps or “rebasing” tokens can trigger tax rules depending on how they affect your ownership.
💡 Tip: If your wallet balance changed in a way that gave you something new, it probably counts as income or a sale.
Self-Custody Isn’t a Tax Shield — It’s a Responsibility
Non-custodial wallets are powerful. They give you control — but also full accountability.
Unlike centralized exchanges that issue 1099 forms, wallets don’t file reports for you. That’s on you.
If you:
- Use MetaMask or Trust Wallet
- Store assets in a cold wallet like Ledger or Trezor
- Participate in DAOs or yield farms via browser wallets