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 digital currencies treated as cash for the purposes of large transactions, with a requirement that these are reported to the relevant authorities when exceeding the $10,000 threshold.
“As with cash transactions, businesses that receive cryptoassets with a fair-market value of more than $10,000 would also be reported on.”
The report suggested 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 digital currency market already having grown to volumes of $2 trillion in the trailing 12 months.
The report also highlights the potential for tax evasion through digital currency, 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“This is because the IRS operates outdated systems and lacks the ability to fully take advantage of the benefits of more modern technology due to its resource constraints.”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.
Neeraj K. Agrawal, director of communications at crypto advocacy group Coin Center, was quoted by Decrypt saying that bringing digital currency regulation to parity with cash would be a net positive development for the sector, and for the mainstream adoption and usage of digital currency.
“Parity with cash has always been the best case scenario. Cryptocurrencies work like cash so it’s not surprising that they will be treated like cash.”
On treasury report:
We need to see specifics for this proposed new 1099 form. Will it be too invasive?
But as of now this rule looks technology neutral. Crypto same as cash. That seems good.
Also only applies to intermediaries. Not p2p transactions
— Neeraj K Agrawal (@NeerajKA) May 20, 2021
See also: CoinGeek Live panel on Regulation of Digital Assets & Digital Asset Businesses
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