Feds call for stricter cryptocurrency compliance with IRS

WHAT YOU NEED TO KNOW:

• The Treasury Department announced Thursday that it is planning to regulate cryptocurrency markets and transactions.
• The Treasury will now require any transfer of at least $10,000 to be reported to the IRS.
• According to the Treasury, “Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion.”

The Treasury Department made an announcement Thursday that will change how cryptocurrency markets and transacts. The agency is now demanding that any transfer of at least $10,000 should be reported to the Internal Revenue Service.

In a statement, the Treasury said: “Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion.”

“This is why the President’s proposal includes additional resources for the IRS to address the growth of cryptoassets,” the department added. “Within the context of the new financial account reporting regime, cryptocurrencies and cryptoasset exchange accounts and payment service accounts that accept cryptocurrencies would be covered. Further, as with cash transactions, businesses that receive cryptoassets with a fair market value of more than $10,000 would also be reported on.”

Coin Metrics reported Bitcoin reversed course just after the Treasury made the announcement. Bitcoin was last seen trading up 1.6%,

In recent months, several Wall Street analysts predicted that regulators at the Treasury and the Securities and Exchange Commission will soon have a hand in cryptocurrency regulation.

The Treasury Department announcement is part of the Biden administration’s efforts to act more forcefully to regulate on tax evasion and promote better compliance.

Stricter regulations will surely upset some cryptocurrency investors, especially after experiencing a bitcoin slide of about 25% over the past month.

Gary Gensler, now the head of the SEC, is a cryptocurrency expert. Financial services firm Raymond James says it’s expected that Congress will grant SEC a broader jurisdiction.

Earlier this month, Gensler told legislators that letting the SEC regulate cryptocurrency exchanges will help ensure investors are protected and prevent market manipulation.

“Chairman Gensler is viewed as a potential ally for cryptocurrencies as a former professor on the topic; however, these statements are likely to revisit debates regarding the regulatory risk to cryptocurrencies and exchanges,” Raymond James analyst Ed Mills wrote earlier in May.

“In the short-term, this could cause headline risk,” he added. “However, in the medium-to-long term, regulation would add further legitimacy to the asset class and could provide a regulatory moat around existing cryptocurrency exchanges.”

Both Democrats and Republicans prioritize cryptocurrency in 2021. Bitcoin’s price run-ups in 2020 raised concerns of market manipulation and uninformed retail investments.

Source: CNBC