US cryptocurrency exchanges like Coinbase and Kraken are now required to submit specific information about their clients' transactions to the Internal Revenue Service (IRS) to improve control of the cryptocurrency market and prevent tax evasion.
This regulatory drive from Washington, D.C., intends to match reporting criteria applied to traditional financial markets and increase openness in the cryptocurrency space, according to Reuters.
US Cryptocurrency Exchanges Face Stricter Regulations
In order to prevent tax evasion related to cryptocurrencies, the US Treasury and the IRS have proposed new restrictions, building upon the 2021 reporting rules.
By requiring platforms that facilitate the buying and selling of digital assets to keep track of critical information like capital gains and losses, these regulations would expose these platforms to regulatory norms akin to those that apply to stock or bond brokers.
The Joint Committee on Taxation estimates that the idea may bring in up to $28 billion more in revenue. The proposal includes both centralized and decentralized digital asset trading platforms, as well as cryptocurrency payment processors and online wallets used to store digital assets, expanding the definition of "brokers" in a major way.
Crypto exchanges were initially required to gather this data by 2024; however, these regulations were postponed. Beginning on January 1, 2025, brokers will be required by the new regulations to record the gross proceeds of sales of digital assets.
Sales happening on or after January 1, 2026, must be reported on an adjusted basis. Brokers will be able to provide taxpayers with 1099-A documents to help them assess their tax liabilities after the IRS introduces them. It's vital to remember that these regulations won't apply to businesses engaged in mining or validating cryptocurrencies, a position taken by the Treasury last year and supported by both parties.
The draft regulations are up for public comment through October 30. In a broader sense, legislation from Congress has been filed to create a legal framework for the issue and trading of digital assets at regulatory agencies, including the Securities and Exchange Commission and Commodity Futures Trading Commission.
This legislative initiative highlights the continuous discussion about the function of cryptocurrencies in the financial system. A think tank with close ties to powerful billionaires has been successful in campaigning for the US Supreme Court to consider a case that may protect the wealthy from future wealth taxes in a different context, as per The Guardian.
Manhattan Institute Linked to Billionaires' Travel Gifts to Conservative Justices
The Manhattan Institute pushed for the high court to hear the Moore v. US case because it was associated with billionaires who allegedly gave costly travel gifts to conservative Supreme Court justices. The fairness of billionaires' tax payments has come under scrutiny in this case because of a $15,000 tax dispute.
The information has led to accusations of unethical behavior and improper behavior in the legal system against the justices who were reportedly given gifts by these millionaires.
The presence of these billionaires in the lives of the judges has sparked concerns about how these ties may affect the issues that the court chooses to hear. The Moore v. US lawsuit seems to be focused on a small tax controversy regarding bitcoin investments and the related tax obligations.
The regulatory focus on cryptocurrencies continues to grow, with US authorities attempting to build more precise supervision mechanisms in a financial landscape that is rapidly changing. There are still arguments about justice, taxation, and the place of digital assets in the larger economy as the IRS strengthens its control over Bitcoin transactions.
Both the Bitcoin market and the regulatory environment that surrounds it are likely to change as a result of these developments, The Washington Examiner reported.
