Bitcoin falls below $40,000 again as US Treasury tightens tax regulations on cryptocurrencies

A single cryptocurrency transaction of $10,000 or more in equivalent value must be reported to the IRS.

Bitcoin falls below ,000 again as US Treasury tightens tax regulations on cryptocurrencies

The U.S. Treasury Department will tighten tax regulations on cryptocurrency markets and transactions, saying it will require single cryptocurrency transactions of $10,000 or more in equivalent value to be reported to the IRS, which is seen as an important part of the Biden administration’s proposal to strengthen tax compliance.

The U.S. Treasury Department stated in a press release on its official website that

The monitoring of cryptocurrencies has become an important issue that facilitates many illegal activities, including tax evasion, and that is why the President will provide additional resources to the IRS to address the growth of crypto assets. Under the new financial account reporting system, cryptocurrencies, crypto asset exchange accounts, and accounts of payment services that accept cryptocurrencies will be included. As with cash transactions, businesses that receive more than $10,000 in fair value of cryptocurrency will also be subject to this reporting regime.
The U.S. Treasury also noted that although cryptocurrencies represent only a small share of current commerce, full reporting is still necessary, and the move is intended to minimize the opportunity and incentive to shift income out under the new reporting system.

The press release from the U.S. Department of the Treasury was issued as part of the Biden administration’s policy announcement to combat tax evasion and promote compliance, the media said. Among the specific initiatives officials are considering are proposals to increase IRS funding and technology, and to increase penalties for those who evade taxes. According to estimates from the U.S. Treasury Department, in 2019 alone, there is a nearly $600 billion difference between the amount of taxes due to the U.S. government and the amount of taxes actually paid.

Financial blog ZeroHedge, citing several senior cryptocurrency traders, said the U.S. Treasury’s move is generally positive because it suggests that “regulation” rather than a “blanket ban” will be the way forward.

However, ZeroHedge also said that the move to report large transactions a week after the Coronel Pipeline transportation company was hacked is odd. First of all, large income transfers would have been traceable, and that means the IRS could easily find traces on the documents; if they say it was used to track off-the-books income, it’s also hard to explain, could it be that the vast majority of off-the-books income is processed in U.S. dollars?

With regard to increased regulation, there is a view that this could unsettle some cryptocurrency investors and talk of capitulation has entered online forums, although institutional views differ. Regent Financial (Raymond James) believes it is only a matter of time before Congress grants the regulator broader jurisdiction over cryptocurrencies as Gary Gensler becomes head of the SEC. gensler had said earlier this month that allowing the SEC to regulate cryptocurrency exchanges would help ensure investors are protected and prevent market manipulation.

Ed Mills, an analyst at Rigel Financial, noted in early May that Gensler was previously seen as a potential ally of cryptocurrencies because he was once a professor in cryptocurrencies, and that his aforementioned statement would reopen the market discussion about the risks of regulating cryptocurrencies and exchanges. increase the legitimacy of the asset class and potentially provide a regulatory moat for existing cryptocurrency exchanges.

It is worth noting that as early as April 20 there was news that regulation of digital currencies may be imposed on the part of the U.S. government. At the time, Fox Business News reporter Charles Gasparino cited sources as saying that the White House was discussing relevant regulatory measures, but the discussions were still in the early stages. And the IRS has already added items related to cryptocurrencies to the 2020 version of its tax return (Form 1040) to gain insight into cryptocurrency transactions.

After the announcement of the tightening regulation, the major cryptocurrency market currencies fell rapidly in the short term, with bitcoin rebounding more than 40% today after a more than 30% plunge on May 19 and once recovered to $42,000, but then turned downward after the news was announced and the $40,000 barrier was lost. Ether, which fell more than 40% on May 19, had rallied to near $3,000 today, recovering about $1,000 from its daily low, but saw a nearly 10% drop just an hour after the tighter regulation news was announced. According to CoinDesk’s ticker data, bitcoin was at $39,910.63 at press time, up 2.61% in 24 hours. Ether was at $2,790.73, up 4.43% in 24 hours. Dogcoin was at $0.4015, up 9.67% in 24 hours.

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