The digital currency industry was thrown into panic when the Biden administration revealed that it was seeking to enforce stricter reporting rules in the Infrastructure Bill. Now, the U.S. Treasury is digging even deeper with its new $3.5 trillion budget reconciliation package. This time, it wants even stricter reporting rules to clamp down on tax evasion in the digital currency industry, with the goal being to form ‘tax information exchange agreements’ with other regulators.
The new budget framework is seeking to allocate funds to several sectors that President Biden promised to revive during his campaign. They include $726 billion that will go to the Health, Labor, Education and Pensions Committee; $332 billion for the Banking Committee to improve public housing; $198 billion for clean energy development; and $135 billion to reduce carbon emissions and address drought concerns.
However, for the digital currency sector, it’s the heightened reporting requirements that have caught its attention. Virtual asset businesses must report information on foreign account holders, a report by Roll Call reveals, citing an unnamed government official.
The U.S. government intends on using this information to trade with other regulators globally and acquire similar information about its citizens.
The U.S. Treasury has long claimed that Americans have been increasingly setting up shell companies to avoid taxes, including on digital currency gains.
In its revenue proposal, the Treasury stated, “The global nature of the crypto market offers opportunities for U.S. taxpayers to conceal assets and taxable income by using offshore crypto exchanges and wallet providers. U.S. taxpayers also attempt to avoid U.S. tax reporting by creating entities through which they can act.”
Treasury believes it can combat the use of digital currencies for tax evasion, and to do so, “third party information reporting is critical to help identify taxpayers and bolster voluntary tax compliance.”
If the bill sails through, the Treasury would enforce these reporting rules starting in 2023 and they would apply to all exchanges and providers of digital currency wallets.
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