Biden Administration Releases Details on Plans for Increased Cryptocurrency Regulation, Jul 1, 2021

The Biden administration's new tax proposal would require taxpayers to report cryptocurrency transfers valued at over $10,000 to the IRS as part of a broader effort to increase compliance in revenue collections. Currently, cryptocurrency assets, including bitcoin, are valued at about $2 billion in terms of market capitalization. New regulatory efforts are expected to help close the tax gap—but are also expected to provide valuable information about situations where companies in the U.S. are extorted to pay ransom in cryptocurrency in order to regain control over their IT systems (e.g., the Colonial Pipeline hack, where the company paid a $4.4 million ransom in cryptocurrency shortly after the hack). The plan also includes approximately $80 billion in additional funding to allow the IRS to improve tax compliance and enforcement efforts. Lawmakers are also considering legislation that would require cryptocurrency brokers and exchanges to report information about taxpayers' gains and losses on Form 1099-B. Under current law, cryptocurrency is taxed as property and subject to capital gains tax rules when sold. For more information on the tax treatment and reporting requirements that currently apply to taxpayers who engage in cryptocurrency transactions, see Q 7722.