What the U.S. Treasury’s Cryptocurrency Reporting Requirement Announcement Means

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There’s been a lot of buzz circulating recently about cryptocurrency, specifically Bitcoin. Especially after the U.S. Treasury Department’s cryptocurrency regulation announcement on May 20, 2021. While many of us are now familiar with the term, the actual logistics of how these currencies work and their history is less known. Here’s what you need to know about cryptocurrencies, where they came from, what the new regulations are, and what these new regulations mean for the future.

What is Cryptocurrency

Cryptocurrency is a medium of exchange that is digital, encrypted, and decentralized. This means there is no central authority that manages and maintains the value of cryptocurrency. Essentially, it’s universal digital money that is incredibly hard to trace due to the anonymity of users. Until the recent announcement from the U.S. Treasury Department, these transactions did not have to be reported.

The Dark History

The anonymity of these transactions makes them ideal for illegal activity and offshore accounts. Unsurprisingly, cryptocurrencies have deep roots in international criminal transactions. Recently, light has been shed on the role these currencies play in white-collar crime, predominantly tax evasion.

New Regulation Requirements

The new regulatory requirements include reporting any cryptocurrency transfer worth $10,000 (U.S. dollars) or more to the IRS. This covers cryptocurrencies as well as cryptoasset exchange accounts and payment services that are accepting cryptocurrency.

What Comes Next

In the official announcement, the Treasury said that new requirements are part of anticipating the potential effects of emerging cryptocurrency markets and taking steps to combat tax evasion. The stock market has shown a significant drop in the value of cryptocurrency assets such as Bitcoin, and the decline is expected to continue as regulations take effect.

For more information on how this might affect your unique tax situation, contact us to talk to one of our tax experts.