Crypto firms in the US will have to report client transactions of more than $10,000 to the Internal Revenue Service (IRS). However, the proposal is yet to be approved by Congress.
According to the proposals by the US Treasury, Biden’s tax compliance plan will include crypto reporting as its major objectives. It would also seek to reduce the tax gap, which is the difference between owed taxes and those that are actually paid.
The IRS website indicates that it is already a requirement for traders and businesses to report cash payments of more than $10,000. This helps in curbing money laundering, tax evasion, terrorism financing, and other criminal activities. The Treasury Department now wants these same rules to apply to the crypto market.
Boosting IRS Reach in Crypto
The market capitalisation for digital currencies has increased to $2 trillion, and this has heightened the threat for these currencies being used for tax evasion. Some tax evaders would now opt for cryptocurrencies because of their anonymity instead of using traditional evading tactics such as offshore bank accounts.
According to the Treasury Department, enforcing the crypto regulations would increase IRS resources and help in doubling its workforce. It would also boost the government’s revenues by tapping into an industry that is rapidly growing.
SEC Seeks to Expand Crypto Regulations
The US Securities and Exchange Commission (SEC) has also been advocating for crypto regulations to protect investors. The chair of the SEC, Gary Gensler, stated that he would propose the introduction of more crypto exchange regulations, especially those that solely deal with Bitcoin and not required to seek a license from the commission.
Gensler also pointed out the high volatility of the crypto market, which called for enhanced investor protection.
However, regulating the crypto market is likely to change the interest of investors in cryptocurrencies. Some investors would step away from the market as they will be denied the anonymity of crypto transactions. However, other analysts believe that regulations in the crypto market would boost the legitimacy of the market and enhance the operations of crypto exchanges.
Bitcoin and other cryptocurrencies have not been doing very well this week. Bitcoin has lost nearly a quarter of its value, and at the time of writing, it was trading at around $36,000, down from63,00 in Mid-April. Other cryptocurrencies have also not been doing very well, and this volatile movement is concerning to market regulators.