The regulatory environment in the cryptocurrency ecosystem has been an extremely confusing
ordeal to follow. Day by day, the message grows clearer that the crypto wild west era is truly
done and dusted. The latest move from the IRS strengthens the government’s agenda regarding
individual crypto holdings.
Letters of this nature are meant to act as a fear factor for investors with the penalties and fines
for noncompliance with necessary tax laws highlighted in said correspondence.
Many believe that Coinbase gave account holder information to the government and as a result,
only customers with Coinbase have been sent the letter. However, the IRS stated that they are
not done mailing all their letters yet and will do so by the end of August.
IRS Commissioner Chuck Rettig believes taxpayers need to take this warning very seriously as
the IRS steps up their data analytics processes with regard to digital currencies. In the United
States, Bitcoin and other digital assets are treated as an investment property, on similar lines to
the likes of publicly listed shares and real estate.
Evolution of Regulation
While this story has gained a lot of traction in the media, one crucial point is being left out of the
discussion between cryptocurrency enthusiasts. A few weeks ago, it was revealed that the IRS is
building tax evasion cases against certain individuals and entities who they suspect have used
digital currencies to skirt tax codes.
This is an incredibly important development as it highlights the way regulators have changed
their stance in the past few years. From ignoring Bitcoin and considering it an empty threat, to
full-scale regulatory crackdowns in order to ensure that it doesn’t erode the current system;
governments across the globe have taken a complete u-turn after 2017’s bull market wiped out
unwitting investors.
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