Hi readers, In today's newsletter, RDC's Ankit Mehta says that crypto-focused ADRs could drive institutional adoption, serving as the key to unlocking the next stage of growth for digital assets. Then, Saim Akif of AKIF CPA warns cryptocurrency holders to be wary of these five common accounting errors that can trigger an IRS audit.
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Depositary Receipts: A Critical Direct Bridge Between Crypto and TradFi |
Digital assets have grown into a multi-trillion-dollar market, yet they remain largely disconnected from traditional finance. Institutional investors increasingly want to own and monetize digital assets, but most banks, broker-dealers and asset managers operate on infrastructure designed for stocks and bonds — not blockchain-based assets. While spot crypto ETFs are an important step toward integration, they only enable passive exposure to the asset class. For digital assets to fully mature, they need a mechanism that bridges them with the entirety of the existing capital markets infrastructure in a familiar, regulated way. Enter American Depositary Receipts (ADRs). For nearly a century, receipts have served as that bridge for international stocks, debt and commodities, enabling U.S. investors to own foreign assets with the same ease as domestic securities. The first ADR—issued in 1927—set the stage for a system that today facilitates trillions in global investment. ADRs work because they provide fungibility, economic and governance rights and U.S. regulatory oversight, all while ensuring efficient settlement through the Depository Trust & Clearing Corporation (DTCC). They enhance local liquidity and market access, as seen in Chinese companies listing on the London Stock Exchange and U.S. stocks trading in Brazil. Crypto as the modern foreign market Crypto-focused ADRs will play a similar role for digital assets. Just like foreign markets, crypto operates outside the traditional U.S. capital markets, making it difficult for most institutions to engage without specialized infrastructure. ADRs provide a regulated, accessible and familiar framework that enables: |
- Seamless access – Crypto can be included in funds and held at existing banks and brokerage accounts, unlocking traditional capital markets utility.
- Efficient two-way convertibility – By not being limited to authorized intermediaries, ADRs provide asset owners the choice to convert underlying crypto and ADRs in-kind.
- Cost efficiency – ADR conversions are simple, same-day processes that do not require a NAV calculation. Fees are never deducted by selling the underlying crypto.
- Institutional workflow compatibility – Settlement through DTCC via unique identifiers like CUSIP and ISIN ensure seamless alignment with existing workflows.
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TradFi demands crypto Institutional demand for digital assets is surging, but most traditional market participants are still tied to DTCC rails and are not set up to directly interact with crypto. ADRs meet these firms where they are today, while also addressing key regulatory, compliance and operational hurdles: |
- Regulation – ADRs are SEC-regulated securities with CUSIPs, ISINs and tickers, ensuring investor protection.
- Compliance – Only regulated entities (broker-dealers, banks, etc.) custody and service ADRs, maintaining high compliance standards.
- Operations – ADRs settle through traditional stock clearing systems, just like any other security.
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Unlocking market expansion By linking the $3 trillion crypto market with the $87 trillion securities market in DTCC, ADRs can drive institutional adoption and unlock new opportunities in the traditional markets, including the following: |
- 24/7 trading – Crypto markets never close, but traditional securities do. ADRs enable round-the-clock trading of traditional securities, mitigating overnight and weekend risk. Since the launch of spot bitcoin ETFs in early 2024, BTC has experienced 10% swings on two separate weekends —moves that institutional investors could not fully capitalize on.
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- Yield, lending & settlement – ADRs could be used for margin trading, settlement of spot crypto and futures trading, collateralized lending and structured products. Due to their unique ability to link ADR and spot crypto liquidity, ADRs are an ideal instrument to institutionalize these use cases.
- Custody choice – Investors can conveniently hold assets on-chain or in traditional brokerage accounts.
- Fund inclusion – Due to their security status, ADRs enable crypto ownership in ETFs and institutional portfolios.
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Conclusion: a foundation for institutional growth ADRs revolutionized global investing by making foreign stocks seamlessly available to U.S. investors. Now, there is a unique opportunity to continue this legacy of enabling market access. By providing a regulated, efficient and familiar bridge for institutions to engage with digital assets, ADRs could be the key to unlocking crypto's next stage of growth and ultimately bring new institutional capital on-chain. |
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5 Crypto Tax Mistakes That Could Trigger an IRS Audit |
With IRS audits on the rise for 2025, cryptocurrency holders face more scrutiny than ever. It's not just about paying taxes. The evolving rules mean even small oversights can lead to large penalties or expensive audits. Below are five common missteps that often catch crypto investors off guard — and how you can stay compliant. 1. Neglecting wallet-based accounting The IRS now expects detailed reporting of each wallet's transactions and balances. That means no more lumping all your trades together on a single spreadsheet. Whether you're using hot wallets, cold wallets or a combination of both, each wallet's records must be individually tracked. Tools like CoinTracking, CoinLedger or TaxBit can simplify this process by syncing real-time data from various exchanges. Proper wallet-based accounting not only keeps you compliant but also prevents surprises if the IRS decides to dig into your transaction history. 2. Misreporting staking rewards Staking rewards are taxable income the moment they hit your wallet — even if you haven't sold them for fiat. Many people mistakenly think they only have to report staking income at the time of sale, but the IRS disagrees. For instance, if you earn 2 ETH worth $3,000 total in staking rewards, that's taxable income when received. Missing or misstating these amounts can draw unwanted attention from regulators who are already watching crypto activity closely. 3. Overlooking IRS letters and form 1099-DA Key IRS notices like Notice 6371 (basically, "we have questions"), Notice 6374 ("explain yourself") and CP2000 ("we think you owe us") can arrive if something doesn't line up in your tax filings. In 2025, crypto exchanges will also send Form 1099-DA, which outlines your crypto income, trades and rewards. Any discrepancy between this form and what you report is a surefire red flag. Always review these documents carefully for accuracy and be prepared to correct any errors before they escalate. 4. Failing to report all transactions Think those small trades on a decentralized exchange are invisible? Think again. The IRS and its partners have sophisticated blockchain analysis tools that track activity, even on decentralized exchanges (DEXs) and privacy coins. Every single transaction — trades, airdrops, forks and rewards — must be included in your tax filing. "I forgot" won't save you if your wallet addresses are linked to unreported transactions. 5. Missing the chance to adjust cost basis and avoiding excessive deductions The 2025 tax year brings a critical opportunity to adjust your crypto cost basis under new guidelines. These rules allow investors to reallocate unused cost basis across wallets or exchange accounts, provided they document the method before their first 2025 trade and follow specific record keeping requirements. Done correctly, it can lower your capital gains tax and keep you in the clear. However, going too far with deductions — like inflating business expenses or hobby-related costs — can trigger an audit if numbers appear unrealistic. The IRS scrutinizes deductions that don't align with typical income levels, so stay within reason and maintain thorough supporting records. Staying audit-ready Crypto taxation is increasingly complex, but staying compliant doesn't have to be stressful. The best practices? Use reliable crypto tax software, double-check every detail on your return, keep meticulous records and be transparent if you discover past errors. A proactive approach helps ensure you're ready for any IRS inquiry — and keeps your focus on what really matters: your crypto investments. Please see here for the full article and more detailed guidance. |
- Saim Akif, director cryptocurrency & blockchain tax strategy, AKIF CPA |
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