U.S. Treasury Department Issues Tax Regime for Cryptocurrency Transactions
The U.S. Treasury Department has finally issued its long-awaited tax regime for cryptocurrency transactions, bringing clarity to the rules that digital assets brokers will need to follow starting next year. The new Internal Revenue Service (IRS) rules for crypto brokers, released on Friday, require trading platforms, hosted wallet services, and digital assets kiosks to submit disclosures on customers’ assets movements and gains.
The regulations also cover stablecoins like Tether’s (USDT) and Circle Internet Financial’s (USDC) and high-value non-fungible tokens (NFTs) in certain circumstances. However, the IRS has deferred decisions on brokers that do not take possession of customers’ crypto, stating that further study is needed.
While major platforms like Coinbase Inc. and Kraken will need to comply with the new rules starting January 1, 2025, non-custodial crypto businesses have been granted a temporary reprieve. The regulations aim to improve tax compliance in the crypto space and provide taxpayers with the necessary information to report their digital asset activity.
The U.S. tax regulators estimate that around 15 million people will be affected by the new rule, with approximately 5,000 firms needing to comply. The IRS has also provided exemptions for stablecoin users who do not earn more than $10,000 in a year, and has implemented aggregated reporting for stablecoin sales.
The regulations also address the handling of NFTs, with taxpayers only required to report aggregated proceeds if they make more than $600 in a year from NFT sales. The IRS intends to monitor NFT reporting to ensure compliance and may reconsider the rules if abuses are detected.
Overall, the new tax regime for cryptocurrency transactions marks a significant step towards regulating the industry and improving tax compliance. The IRS’s efforts to provide clarity and guidance in this complex space are aimed at reducing tax evasion and ensuring that taxpayers fulfill their reporting obligations.
