White House Reviews IRS Proposal to Tax Foreign Crypto Accounts
The White House is reviewing a proposal from the Internal Revenue Service (IRS) aimed at requiring Americans to report and pay taxes on digital assets held in foreign accounts. This initiative would apply rules similar to the Foreign Bank and Financial Accounts Report (FBAR) and the Foreign Account Tax Compliance Act (FATCA) to cryptocurrency holdings located abroad.
Foreign accounts potentially targeted under this proposal include offshore exchanges, foreign custodians, brokers listing tokenized assets, and wallet providers that have offshore entities. The IRS seeks greater visibility into holdings in these foreign entities and intends to broaden the definition of foreign accounts to include such digital asset platforms.
This change would primarily affect taxpayers who currently only pay taxes on cryptocurrencies once they are moved to onshore exchanges. The rationale behind the proposal is to close existing loopholes that allow the shifting of digital assets to offshore accounts, thereby encouraging growth in the domestic crypto market and facilitating easier tracking and regulation. Raising significant additional revenue is not the principal goal.
The Common Reporting Standard for Automatic Exchange of Information on Financial Accounts (CARF) is cited as a reference framework to discourage U.S. taxpayers from transferring digital assets to offshore exchanges. This proposal aligns with the broader White House agenda to enhance crypto regulation in 2025.
