Most crypto companies are sitting on tens, or even hundreds, of thousands in tax savings without realizing it. Why?
Because while founders are busy navigating SEC risk, licensing laws, and smart contract bugs… they're ignoring the huge pile of R&D credits the IRS is practically handing out right now.
With the OBBB's passage in July 2025, the tax landscape for R&D-intensive companies has fundamentally shifted. The restoration of immediate research expense deductions, combined with enhanced R&D tax credits, creates what tax professionals call the most favorable environment for innovation-driven businesses in over a decade.
Does Blockchain Development Qualify for R&D Credits?
The entire Blockchain industry has always been built on continuous innovation and experimentation. Unlike established industries with mature technologies, crypto companies are inherently pushing technological boundaries—exactly what R&D credits incentivize.
The Section 41 R&D tax credit requires activities to meet a four-part test:
- Permitted Purpose: Develop new or improved business components with enhanced functionality, performance, or reliability
- Elimination of Uncertainty: Research must resolve technical uncertainties about design or development methods
- Process of Experimentation: Activities must involve systematic testing to evaluate alternatives
- Technological Foundation: Research must rely on computer science, engineering, or related scientific principles
If your team’s asking:
- “How do we design this consensus mechanism?”
- “Can we make cross-chain messaging faster?”
- “What’s the best way to reduce MEV exposure?”
…then congratulations, you’re doing R&D. These activities involve technological uncertainty, systematic experimentation, scientific principles, and business component improvements.
Qualifying expenses include employee wages (the largest component), supplies, cloud computing services, and third-party contractor costs. This means crypto companies can claim tax credits for blockchain engineers, security specialists, UI designers, and other technical staff involved in research activities.
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💡 Key Insight: Most crypto companies are already conducting qualifying R&D activities—they just need to recognize, document, and claim them properly.
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The OBBB Ushers in a New Era of Expanded Benefits
The OBBB has fundamentally transformed the R&D landscape, creating what many experts are terming a "perfect storm" of benefits for crypto companies.
Immediate Expensing Restored
The most significant change eliminates the requirement to amortize research expenses over five years. Starting with 2025 tax years, companies can deduct R&D expenses immediately. For a crypto company spending $500,000 annually on research costs (remember, that includes employee wages), this accelerates $400,000 in deductions that would have been spread over five years—representing $84,000 in immediate tax savings at a 21% tax rate.
Retroactive Relief for Small Businesses
Companies with average annual gross receipts of $31 million or less can also elect immediate expensing retroactively for 2022-2024. A blockchain startup that amortized $300,000 in R&D expenses annually could potentially claim refunds of $189,000 by amending prior returns.
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💡 Key Insight: In effect, the OBBB creates a "double benefit"—immediate deductions plus substantial tax credits, making 2025 optimal for accelerating R&D investments.
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What Counts as R&D in a Crypto Company?
The breadth of qualifying activities often surprises crypto business owners. R&D credits aren't limited to groundbreaking innovations: incremental improvements and integration challenges often qualify, making credits accessible to crypto companies at all development stages. The key is the research nature of the activity, not project size or ultimate success.
Here’s a breakdown of some of the activities that qualify for different types of crypto companies:
Qualifying R&D Activities for Exchanges and Trading Platforms
- High-frequency trading algorithms and order matching engines
- Advanced custody solutions and multi-signature protocols
- Real-time pricing feeds and cross-exchange arbitrage systems
- Cross-chain transaction capabilities and compliance automation
Qualifying R&D Activities for DeFi Platforms
- Automated market maker algorithms and liquidity optimization
- Yield farming mechanisms and tokenomics models
- Governance systems and decentralized voting infrastructure
- Flash loan protocols and risk management systems
Qualifying R&D Activities for Payment and Wallet Providers
- Mobile/web wallets with enhanced security features
- Fiat-to-crypto conversion systems
- Transaction privacy enhancements
- Merchant payment gateways
These are just a few illustrative examples; the reality is that many different types of investment your company might already be making can qualify for R&D credits.
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💡 Key Insight: These don’t need to be groundbreaking innovations. If your team’s building or improving core technology, you’re likely eligible.
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Documentation Requirements and Best Practices
Starting with 2025 returns, the IRS requires enhanced documentation through updated Form 6765. Crypto companies must identify each business component being developed, such as specific protocols or systems. They need to document the research activities performed, including the technical challenges addressed and methods used to resolve them. The form also requires naming personnel who participated in research and breaking down qualified expenses by activity.
The good news? You already have most of what the IRS wants: Git commits, smart contract audits, security test logs, and Slack threads arguing over validator logic.
Supporting Documentation
Blockchain development naturally creates much of the supporting documentation the IRS requires. Version control systems like Git repositories automatically track iterative development and experimentation. Testing results, performance benchmarks, and security audits provide evidence of systematic experimentation. Technical specifications, architecture documents, and protocol definitions demonstrate the technological foundation of research activities.
Project Communications
Project communications offer additional support for R&D claims. Meeting notes discussing technical challenges, development decisions, and experimental approaches help establish the research nature of activities. Email threads and technical discussions in project management systems create contemporaneous records of uncertainty elimination efforts.
Documentation Pitfalls
Crypto companies should avoid several common documentation pitfalls. Generic activity descriptions like "software development" won't suffice—the IRS wants specific technical challenges and uncertainties addressed. Time records don't need to be rigidly tracked, but estimates must be reasonable and supportable through project records or staff interviews. Every research activity must be clearly linked to specific business components that the company sells, licenses, or uses. Finally, don't overlook qualifying personnel beyond core developers, including technical project managers, security specialists, and other staff who directly support research activities.
Do I Need Perfect Timesheets?
No, in most cases you need credible estimates, tied to specific projects, supported by real records. That means Git logs, JIRA tickets, or even Slack messages that show an adequate digital trail.
Ready to Get Paid for the Work You’re Already Doing?
Most crypto founders don’t realize their engineering payroll could be funding their next raise. With the new OBBB rules, you can get cash back on past years and slash your 2025 tax bill.
At Iota Finance, we specialize in helping crypto companies navigate these opportunities while building scalable financial systems.
Our approach includes technical activity assessment, OBBB optimization, documentation system design, multi-state planning, and ongoing compliance. We understand both blockchain technology and R&D credit requirements, helping you identify qualifying activities and claim maximum benefits.
Ready to unlock substantial tax savings while accelerating crypto innovation?Schedule a free R&D credit review to discover how R&D credits can transform your tax strategy and fuel your company's growth.
Disclaimer: This article reflects the regulatory and accounting environment as of mid-2025 and is for informational purposes only. Custody accounting requirements can be complex and fact-specific. For guidance tailored to your exchange's specific operations and risk profile, contact Iota Finance.