IRS Warning Letters to Crypto Holders Marks a New Era of Regulation
The Internal Revenue Service (IRS) has sent out warning letters to over 10,000 different cryptocurrency holders, letting them know that the agency acknowledges their investment in digital assets and expects them to declare fair value of assets held on the date of receipt. The days of easy regulation are over as countries step up their pursuit of cryptocurrency regulation, as reported by the Wall Street Journal, July 26, 2019.
Sending a Message
The regulatory environment in the cryptocurrency ecosystem has been an extremely confusing ordeal to follow. Day by day, the message grows clearer that the crypto wild west era is truly done and dusted. The latest move from the IRS strengthens the government’s agenda regarding individual crypto holdings.
Letters of this nature are meant to act as a fear factor for investors with the penalties and fines for noncompliance with necessary tax laws highlighted in said correspondence.
Many believe that Coinbase gave account holder information to the government and as a result, only customers with Coinbase have been sent the letter. However, the IRS stated that they are not done mailing all their letters yet and will do so by the end of August.
IRS Commissioner Chuck Rettig believes taxpayers need to take this warning very seriously as the IRS steps up their data analytics processes with regard to digital currencies. In the United States, Bitcoin and other digital assets are treated as an investment property, on similar lines to the likes of publicly listed shares and real estate.
Evolution of Regulation
While this story has gained a lot of traction in the media, one crucial point is being left out of the discussion between cryptocurrency enthusiasts. A few weeks ago, it was revealed that the IRS is building tax evasion cases against certain individuals and entities who they suspect have used digital currencies to skirt tax codes.
This is an incredibly important development as it highlights the way regulators have changed their stance in the past few years. From ignoring Bitcoin and considering it an empty threat, to full-scale regulatory crackdowns in order to ensure that it doesn’t erode the current system; governments across the globe have taken a complete u-turn after 2017’s bull market wiped out unwitting investors.