The government is concerned about tax evasion via digital currencies.
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Cryptocurrencies pose “a significant detection problem by facilitating illegal activity” such as tax evasion, according to the U.S. Treasury, which says any transfer up to $10K should be filed with the IRS.
The IRS has already started tracking taxpayers who own cryptocurrencies and can legally seize assets of tax evaders.
The Treasury’s proposal is also part of Biden’s comprehensive tax compliance plan, which aims to close the gap between taxes paid and taxes owed. That difference, which totaled $600 billion in 2019, could balloon to $7 trillion if not addressed.
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Cryptocurrencies have skyrocketed in the past three years as entrepreneurs and institutional investors have piled in, using the digital currency market to hedge against inflation. The market cap is now about $2 trillion according to Reuters.
But pushes for regulation have whipsawed price levels.
On Wednesday, Bitcoin plunged 30% after China banned financial firms from offering crypto services. The broad-based selling even triggered an outage at digital currency exchange, Coinbase.
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Just last week Bitcoin lost billions in the market after Tesla announced it would no longer accept Bitcoin as payment, on account of the cryptocurrency’s harmful environmental impact. Tesla did, however, say it wasn’t selling any Bitcoin holdings.
Meanwhile, officials are looking to beef up the IRS’s control further by investing $80 billion in the agency over the next 10 years.
The funding will create 5,000 new enforcement jobs and cover an upgrade of the agency’s “outdated” IT systems.
Related: China Continues Harsh Crackdown on Cryptocurrency