To determine the fair market value of cryptocurrency received through a cryptocurrency exchange at the time of receipt, you should use the value recorded by the cryptocurrency exchange for that transaction in U.S. dollars. If the transaction is facilitated by a centralized or decentralized cryptocurrency exchange but is not recorded on a distributed ledger or is otherwise an off-chain transaction, then the fair market value is the amount the cryptocurrency was trading for on the exchange at the date and time the transaction would have been recorded on the ledger if it had been an on-chain transaction.
Sources:
Notice 2014-21
Rev. Rul. 2019-24
Publication 551 (12/2022)
