The Biden administration is set to tackle cryptocurrency transfers in its latest set of proposals. Part of Biden’s American Families Plan, the proposal intends to tackle tax evasion and would require virtual currency transactions of over $10,000 to be reported to the Internal Revenue Service. Businesses that receive crypto assets with a fair market value of more than $10,000 would also have to report the assets to the tax agency, which the U.S. Treasury Department said is necessary as “compliance rates exceed 95 percent when the IRS can verify taxpayer filings with third-party information reports.”
Biden’s plan is focused on closing the “tax gap,” and this latest proposal plays into his larger scheme to recoup taxes owed to the U.S. government, particularly by the wealthy, by providing funding to the IRS to expand its enforcement capabilities.
Legitimizing Cryptocurrencies
While the proposed reporting standard might initially make investors uneasy, Nigel Green, CEO and founder of deVere Group, says that in the longer run, “they should recognize the move adds further legitimacy to crypto assets and makes the sector more robust which will, of course, drive prices higher.” Green also added that he thinks that this move by the Treasury Department is “the first significant step toward a global regulation” and that “cryptocurrencies, in some form or another, are the future of money.”
The Treasury seems to echo that thought in its report, stating “[d]espite constituting a relatively small portion of business income today, cryptocurrency transactions are likely to rise in importance in the next decade, especially in the presence of a broad-based financial account reporting regime.”
Cryptocurrencies, such as the “OG” bitcoin, along with many others, have exploded in popularity in the past decade or so, and governments around the world have strongly cautioned about their potential use for illicit activity, including tax evasion, as they seek to keep up.
The price of bitcoin fell 5% after the proposal was announced, following China’s regulatory crackdown on cryptocurrencies a day earlier.