Tax evasion and cryptocurrency: Biden tightens his grip
A new day, a new crusade against the world of cryptocurrencies. When it is not the eccentric and untouchable Tesla CEO testing the limits of his manipulative power on the market. It is national governments trying to control this new economy as best they can while taking their share of the pie – we wouldn’t expect anything less of course!
The life of an American crypto investor
It is now the turn of Joe Biden’s administration to take a serious look at the issue of tax evasion through digital currencies. According to the estimates of the Internal Revenue Service (IRS), this type of fraud could amount to more than one trillion dollars (~£706 billion). As you will see, the American tax authorities do take tax evasion lightly! It will surely not be the last attack on this subject.
The life of an investor in the US is already difficult thanks to many restrictions the SEC has placed on investors. It has drastically reduced the scope of services vis-à-vis cryptocurrencies. In addition to this you have some of the harshest taxation against any crypto-to-crypto trading. The fact that countries like France have a more advantageous system in this regard, really shows you how harsh the American system is. So you think, with all these restrictions that Biden’s administration was maybe going to simplify it – quite the contrary.
The IRS on the lookout for tax evaders
The new proposal made by the Treasury Department in its “Greenbook” intends to drive home the point of global surveillance. By pinning down American taxpayers who made the fatal mistake of not reporting any cryptocurrency exchanges.
The proposal, which is thought to come into force in 2023, has been justified in this manner:
“The global nature of the crypto market offers opportunities for U.S. taxpayers to conceal assets and taxable income by using offshore crypto exchanges and wallet providers.“
This measure would be aimed at both residents in and expatriates of the United States of America. Yes that’s right, the world’s ‘police’ has the unique trait of never taking its eyes off their citizens. No matter where they choose to live, they remain liable for tax in their country of birth. Regardless of the asset class, cryptocurrencies included, it involves the same restrictive obligations. Nothing and no one escapes the eye of this ‘big brother’ surveillance.
In concrete terms this would take place in the form of data collection from foreign financial institutions. Furthermore, it would concern any exchange, purchase or sale of any type of crypto asset. In addition to a requirement for companies to report any crypto transfers of a value over $10,000 (~£7,060).
In short, a practice similar to what was already done in terms of sharing banking information with the various countries that have signed the FATCA agreement.
The US Treasury does not intend to spare the few courageous investors who embark on the cryptocurrency adventure. On the one hand, making life tough for crypto traders and companies with strict regulations, while also coming in to grab the fruits of their labour as soon as these virtual currencies become too big. The IRS clearly has no intention of letting a single penny of this juicy new economy slip away, much to the annoyance of the poor old American taxpayer.
Just your average global millennial embracing, and interested in, the future of money and finance. Excited by blockchain tech as well as fintech but have a special passion for DeFi and Yield Farming, what will this technological disruption bring next?