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- Tax evasion reforms and reporting regulations have been added to cryptocurrency companies in the US for smoother functionality
- Transactions above $10000 need to reported to the IRS along with the user account details to the federal government
- Regulations will place investors in a fix as cryptocurrency will lose its flavour of remaining decentralised
The first budgetary proposals by the Biden administration included significant policies that would affect the cryptocurrency community on a huge scale. According to research conducted, 44% of Americans are eager to invest in cryptocurrency and make it a preferred mode of payment. However, the two proposals in the latest budget will raise concerns.
Brokers need to disclose information related to passive cryptocurrency holdings and disclose user data for transactions breaching the $10,000 mark for tax issues. Several experts believe that the market might take a further plunge as a result of the policies. It will further prevent new entrants from making a market.
Information reporting for tax compliances
In the previous week, the US officials had stated that user information needs to disclose or transaction over and above $10,000. Furthermore, the IRS needs to keep a tab on such transactions to prevent illicit activities. The same rule is applied when a citizen deposits cash more than $10k in a checking account. The IRS ensures that the cash/cryptocurrency is coming from a valid source and prevents fraudulent activities.
Secondly, brokers are now required to report substantial passive crypto holdings of entities that might be of concern. Tax evasion has been on the rise and huge amounts of money can be transported without actually leaving the shores of the country. Cryptocurrency continues to revolve in exchanges that are not registered in the country and act as a useful mechanism to prevent hefty taxes on the same.
Regulating cryptocurrency is of prime importance for various authorities
Although the US lacks the necessary framework to regulate digital assets, the budgetary proposals lay the foundation stone of an efficient regulatory body being developed to oversee the digital transactions. It will hurt many investors as decentralised finance will lose its charm. Anonymous transactions have fetched new investors with an aim to invest for the long term and protect them from rising inflation.
The extent of regulations will pave the way cryptocurrency will function in the country. The government feels that regulating it is an important issue to be dealt with currently. There will be serious repercussions in the early stages but it will protect investors in the long run from fraudulent activities.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
