According to CNBC and other media sources, the U.S. Treasury Department will tighten tax regulations on cryptocurrency markets and transactions, saying it will require single cryptocurrency transactions of $10,000 or more in equivalent value to be reported to the IRS, which is seen as an important part of the Biden administration’s proposal to strengthen tax compliance.
In a press release on its official website, the U.S. Treasury Department said.
Cryptocurrency has become a significant criminal problem that facilitates many illegal activities, including tax evasion, and this is why the President will provide additional resources to the IRS to address the growth of crypto assets. Under the new financial account reporting system, cryptocurrencies, crypto asset exchange accounts, and payment service accounts that accept cryptocurrencies will all be included. As with cash transactions, this reporting system will apply to businesses that receive more than $10,000 in fair value of cryptocurrency.
The U.S. Treasury also noted that although cryptocurrencies represent only a small share of current commerce, full reporting is still necessary, and the move is intended to minimize the opportunity and incentive to shift income out from under the new reporting system.
Some media outlets have suggested that the current press release from the U.S. Treasury Department comes as part of the Biden administration’s policy pronouncements intended to combat tax evasion as well as promote compliance. In terms of specific initiatives, officials are considering proposals that include IRS funding and technology, as well as increased penalties for those who evade taxes.
According to estimates from the U.S. Treasury Department, in 2019 alone, there is a difference of nearly $600 billion between the taxes due to the U.S. government and the taxes actually paid.
In response to the increased regulation, there are suggestions that this could unnerve some cryptocurrency investors, and talk of capitulation has entered online forums, though institutions don’t see it that way. Regency Financial (Raymond James) believes it is only a matter of time before Congress grants the regulator broader jurisdiction over cryptocurrencies as Gary Gensler becomes head of the SEC. gensler had said earlier this month that allowing the SEC to regulate cryptocurrency exchanges would help ensure investors are protected and prevent market manipulation.
Ed Mills, an analyst at Rigel Financial, noted in early May that Gensler was previously seen as a potential ally of cryptocurrencies because he was once a professor in cryptocurrencies, and that his statement above would reopen the discussion in the market about the risks of regulating cryptocurrencies and exchanges. mills said that tighter regulation of cryptocurrencies could raise risks in the short term, but in the medium to long term would further increase the legitimacy of the asset class and may provide a regulatory moat for existing cryptocurrency exchanges.
It is worth noting that the current regulatory proposal from the U.S. Treasury Department is not an empty one, as there was news as early as April 20 that regulation of digital currencies might be implemented on the part of the U.S. government. At the time, Fox Business News reporter Charles Gasparino cited sources as saying that the White House was discussing relevant regulatory measures, but the discussions were still in the early stages. And the IRS has already added items related to cryptocurrencies to the 2020 version of its tax return (Form 1040) to gain insight into cryptocurrency transactions.
After the announcement of the tightening regulation, the major cryptocurrency market currencies fell rapidly in the short term, with bitcoin rebounding more than 40% today after a more than 30% plunge on May 19 and once recovered to $42,000, but then turned downward after the news was announced and the $40,000 barrier was lost. Ether, which also fell more than 30% on May 19, stood back at $3,000 today, recovering nearly $1,000 from its daily low and rising more than 22% during the day, but fell nearly 10% an hour after the tightening regulation news was announced. According to CoinDesk’s ticker data, bitcoin was at $39,910.63 at press time, up 2.61% in 24 hours. Ether was at $2,790.73, up 4.43% in 24 hours. Dogcoin was at $0.4015, up 9.67% in 24 hours.
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