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In an effort to tackle tax evasion in the cryptocurrency space, the US Treasury Department has unveiled a proposed rule that would require cryptocurrency brokers, including exchanges and payment processors, to share user information, including details of cryptocurrency sales and transactions. Report to the Internal Revenue Service (IRS).
The move is part of a broader effort by Congress and regulatory authorities to ensure tax compliance in the cryptocurrency industry.
The US Treasury Department believes this new approach will help people more effectively meet their tax obligations. Under the proposed rule, the definition of broker covers a wide range of entities, including centralized and decentralized cryptocurrency trading platforms, cryptocurrency payment processors, and online wallets that store digital currencies. This comprehensive approach ensures that the various entities involved in cryptocurrency transactions are subject to reporting requirements.
The law also covers popular cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH), as well as non-fungible tokens (NFTs). Additionally, it extends reporting requirements for cash transactions over $10,000 to digital currencies.
The Biden administration sees these measures as a tool to increase transparency and reduce the possibility of tax evasion in the cryptocurrency ecosystem. It is estimated that these new rules could generate about $28 billion in additional tax revenue over the next decade.
If implemented, the proposed rule would apply to brokers starting in 2025 and for the next tax filing season of 2026. The Treasury Department and the Internal Revenue Service are requesting feedback on the proposal through Oct. 30 and have scheduled public hearings to gather more stakeholder input.
