New proposals being brought forward by the U.S. Treasury Department could see a new requirement to report digital currency transactions of over $10,000 to the IRS as part of the Biden administration’s tax compliance plan. According to a report published by the Treasury Department, the measures would see cryptocurrencies treated as cash for large transactions, requiring that these are reported to the relevant authorities when exceeding the $10,000 threshold.
Authorities are concerned about the use of crypto to aid illegal activities.
The report noted, “As with cash transactions, businesses that receive cryptocurrencies with a fair market value of more than $10,000 would also be reported on.” The report further suggested that the U.S. administration is concerned about digital currency, which “already poses a significant detection problem by facilitating illegal activity broadly including tax evasion.” It also acknowledges that “cryptocurrency transactions are likely to rise in importance in the next decade,” with the crypto market already having grown to volumes of $2 trillion in the trailing 12 months.
Regulators are playing catch up as crypto continues to gain mainstream adoption.
The report also highlights the potential for tax evasion through cryptocurrencies, suggesting the IRS is not agile enough to respond to the rapid pace of change in the sector. “This is because the IRS operates outdated systems and lacks the ability to fully take advantage of the benefits of more modern technology due to its resource constraints.” While some will be concerned about the developments, the requirement for reporting is not universally seen as a negative. With the recent surge in cryptocurrencies and many major companies adopting such currencies, regulators have also been on their toes to regulate the industry.