Internal Revenue Services (IRS) is a United States government agency responsible for enforcement of tax laws and collecting income and employment taxes akin to the Income-tax department of India.
The U.S. issue mandated reporting crypto-assets with a fair market value higher than $10,000 to IRS. This announcement is an addition to existing compliance. Currently, businesses in the U.S. already have compliance to report cash transactions of more than $10,000.
The U.S. government took this step to bring more transparency in crypto trading and holding. It seems that the U.S. government has made cryptocurrency regulation a top priority in 2021 as steep fluctuation in the price of digital assets recently has sparked concerns of uninformed retail investments and market manipulation.
The crypto market slashed after the U.S. government announced a compliance requirement for crypto transactions. The Bitcoin price tumbled from $42K to $38K with this announcement. However, this downfall was temporary, and the prices slowly got back to normal in a few days. A day before the U.S. government announced mandatory compliance, the price of Bitcoin and other cryptocurrencies fell sharply due to the Chinese government’s warning over the risk associated with digital currencies and their negative impact on the environment due to high power consumption.
The report presented by the U.S. government states that crypto transactions pose a significant issue of facilitating illegal activity, including tax evasion.
The new tax laws related to reporting crypto transactions will prove to be vital to prevent tax frauds. U.S experts have estimated that this compliance will bring around $700 billion of tax revenue in the next ten years. Also, regulating the cryptocurrency exchanges will benefit the investors and have control over market manipulation. Regulation of cryptocurrencies will add legitimacy to the asset class.
Do you think the Indian government should take similar steps and regulate the crypto market? Looking at the increasing number of crypto investors in India, this move seems inevitable. Regulation of cryptocurrencies will become an essential step towards securing investors as well as preventing any fraudulent activities.
For any clarifications/feedback on the topic, please contact the writer at jyoti.arora@cleartax.in
I am a Chartered Accountant by profession with 4+ years of experience in the finance domain. I consider myself as someone who yearns to explore the world through travelling & Reading. I believe, the knowledge & wisdom that reading gives has helped me shape my perspective towards life, career and relationships. I enjoy meeting new people & learning about their lives & backgrounds. My mantra is to find inspiration from everyday life & thrive to be better each day.
