Whether crypto swoons or crypto booms, the Internal Revenue Service is going to keep better track of the ups, downs, gains and losses at least as far as taxes are concerned. The Treasury Department said on Thursday (May 20) that it will require crypto-related business transactions above $10,000 to be reported to the IRS.
In a release by the department that was part of a broad, general report on tax compliance, the Treasury wrote that “cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly, including tax evasion.”
Elsewhere in “The American Families Plan Tax Compliance Agenda” Treasury said its updated policy position “involves shining light on opaque income streams, including proprietorship and partnership business income…. The reporting regime would also cover foreign financial institutions and crypto asset exchanges and custodians.”
The urgency is there, too, to modernize reporting systems. The report said that enhanced electronic filing can help matters, but “the IRS operates outdated systems and lacks the ability to fully take advantage of the benefits of more modern technology due to its resource constraints.” Tax evasion has increased, in part due to the fact that top earners avoid their liabilities due to “sophisticated strategies such as offshoring, creating complex partnership structures or moving taxable assets into the crypto economy.”
CBDCs Get the Nod
Separately, in yet another shot across the crypto regulatory bow, as reported by Reuters, Federal Reserve Chair Jerome Powell said in a video message that cryptos may have “potential risks to … users and to the broader financial system.” He said there must be more attention paid to regulation and to “private-sector payments innovators who are currently not within the traditional regulatory arrangements applied to banks, investment firms and other financial intermediaries … to date, cryptocurrencies have not served as a convenient way to make payments, given, among other factors, their swings in value.”
The Fed, for its part, would debut a discussion paper focused on digital payments, with a commentary period to follow. The Fed said in a release that technological changes are transforming the payments landscape with speed. “The Federal Reserve is studying these developments and exploring ways that it might refine its role as a core payment services provider and as the issuing authority for U.S. currency,” according to the release.
Technology, in particular, is enabling the development of central bank digital currencies (CBDCs). “The key focus is on whether and how a CBDC could improve on an already safe, effective, dynamic and efficient U.S. domestic payments system in its ability to serve the needs of households and businesses,” the release noted. Powell was quoted as stating that “we think it is important that any potential CBDC could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks.”
As reported by PYMNTS, commentary during the House Financial Services Committee Hearing on Capitol Hill on Wednesday (May 19) gave indications that the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve may coordinate efforts to set up an “inter-agency policy sprint team” to look into crypto.