Bitcoin Fell to Its 3-Week Low as IRS Looks to Tighten Reporting Norms

The latest move by the Internal Revenue Service (IRS) has led to the price of Bitcoin recording its three-week low. The IRS now seeks more stringent reporting norms, making the digital currency investors hit the sell button. As a result, the investors are now cautious as they may be liable to pay more taxes on their crypto investments. 

Charles Rettig, the IRS Chief, said that Congress should provide a comprehensive statutory authority for the IRS to seek and collect details of crypto transactions valued at $10,000 and above. Currently, most such transactions are going unreported, and the IRS wants to avoid the same. 

At 12 a.m. on Wednesday, Bitcoin was trading at $31,277, which is 12% less than its earlier price of $35,614. This happens to be Bitcoin’s lowest since the 19th of May when it had fallen to around the $30,000 level. However, Bitcoin recovered later in the day, and it was trading around 32,900 by 10 a.m. on Wednesday. 

The year 2021 has already been surreal for cryptocurrencies. They have fallen and risen by significant levels due to various geopolitical factors. The volatility they have shown this year has reminded the investors not to invest their life savings in crypto assets. 

Also, the uncertainty over their acceptance and regulation has only made it worse. For instance, the Chinese government recently had a major crackdown on crypto mining, which sent the price of various crypto assets down. The US Treasury said crypto transactions of over $10,000 should be reported to the IRS, and now the IRS is seeking to tighten the reporting norms. 

The Indian crypto investors still don’t have clarity over the legality of crypto assets. The Reserve Bank of India has repeatedly warned investors of the various associated risks and even issued informal guidance recently to commercial banks to stop facilitating entities operating in the crypto segment, which set panic among Indian investors.

For any clarifications/feedback on the topic, please contact the writer at vineeth.nc@cleartax.in

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