The US Treasury is calling for new rules for more data sharing by cryptocurrency exchanges.
This is reported by Roll Call citing a government official not authorized to speak, according to whom the Biden administration is urging Democrats to add more rules regarding tax compliance of cryptocurrency transactions in the upcoming $3.5 trillion budget reconciliation package
Specifically, he wants brokers who trade cryptocurrencies in the US to report any foreign account holders to the government, so they can use this data as a bargaining chip to obtain information about US investors trading digital currencies in other countries.
Crypto regulation in the US
The aim is greater fiscal control, as the US Treasury itself says it is concerned about the proliferation of offshore shell companies that US taxpayers are using to try to evade taxes, particularly on gains from cryptocurrency trading.
According to IRS Commissioner Charles P. Rettig, the difference between the taxes actually owed by US taxpayers and the taxes actually paid is $1 trillion each year, and some of that is unpaid taxes on cryptocurrency transactions.
Data sharing to combat tax evasion using crypto in the US
The Treasury proposal, however, has not yet been accepted by Congress, and if approved, the new rules would only apply from 2023.
To combat the potential use of cryptocurrencies to evade taxes, information reporting by intermediaries is seen as crucial to help identify taxpayers while promoting voluntary tax compliance. According to the official who unveiled this request, the new system would be similar to obligations under a 2010 law.
In addition, under existing laws, in order to obtain such data from foreign intermediaries, it is necessary to provide the same type of information to foreign authorities, which is why Treasury would like to acquire information about foreign nationals’ transactions on US exchanges.
The fiscal 2022 budget resolution in which the new rules are to be included requires that they be submitted by 15 September.
However, it appears that the debate on this issue has already begun, with some sceptical voices being raised, in particular on the grounds that similar regulations could be overly burdensome for crypto exchanges.
Theoretically, this should not change much for users, except that it will make it more difficult for them to hide any gains made from cryptocurrency trading.
There would be no difference for those who declare everything they earn.
In practice, however, allowing foreign authorities to ask US exchanges for information on the actions of citizens of their home states, so as to obtain the same information from foreign exchanges on US citizens, would open the door to an exchange of information that could also be used in a way that is not necessarily illegitimate.
However, traditional financial markets have been operating in this way since 2010, so it is hard to imagine that crypto intermediaries could avoid having to do so.
Obtaining this information from decentralized exchanges, however, remains impossible.