The U.S. Treasury department today released a report that outlined the Biden administration's tax compliance plan, including a new requirement for businesses to report cryptocurrency transfers of $10,000 or more to the IRS.
“As with cash transactions, businesses that receive cryptoassets with a fair-market value of more than $10,000 would also be reported on," the Treasury Department's report said.
According to the report, the Biden administration is concerned that cryptocurrency "already poses a significant detection problem by facilitating illegal activity broadly including tax evasion."
The Treasury report acknowledged that the crypto market had grown to $2 trillion in the past year, and therefore needed to be watched closely—especially as “cryptocurrency transactions are likely to rise in importance in the next decade.”
It also said that there are more ways people can dodge paying taxes—including via the crypto economy—because the IRS is slow to catch up with modern technology.
“This is because the IRS operates outdated systems and lacks the ability to fully take advantage of the benefits of more modern technology due to its resource constraints,” the report added.
Bitcoin, the largest cryptocurrency by market cap, dipped 6.5% in an hour following the news, according to CoinGecko data.
The currency had recovered recovering following a difficult week where it suffered its biggest crash in over a year.
But the Treasury's moves shouldn't necessarily be unwelcome news for the market, or even unexpected, according to Neeraj K. Agrawal, director of communications at crypto advocacy group Coin Center.
“Parity with cash has always been the best case scenario,” Agrawal said. “Cryptocurrencies work like cash so it's not surprising that they will be treated like cash.”
When asked whether the IRS would struggle to keep up with the fast-moving world of crypto, he added: “If the proposed new IRS form ends up being more invasive, that will be a conversation we have then.”