In yet another blow to the cryptocurrency industry, the US Treasury has revealed plans to mandate the reporting of crypto holdings over $10K held with foreign digital currency service providers. FinCEN, an arm of the Treasury Department that oversees domestic financial laws’ enforcement, will implement the new rule when adopted.
US Financial Watchdogs Tighten Regulations on Crypto
As per a report published on New Year’s Eve, financial regulators intend to amend the Bank Secrecy Act’s Foreign Bank and Financial Accounts (FBAR) to include digital currency as a type of “reportable account.”
The proposal intends to bring FBAR requirements around virtual currency holdings in line with cash held outside the US. At present, FBAR filings only apply to individuals that hold an aggregate of $10+ in offshore financial accounts; the rule exempts crypto as a reportable account.
FBARs must currently include detailed info about all foreign accounts, including the account number, name and address of the foreign bank, and the maximum value held in a financial year. The latest FinCEN amendment will now require similar reporting of all crypto assets held with offshore crypto businesses.
The latest FinCEN proposal targets crypto holdings in offshore accounts and will likely have the most notable impact on users of non-US exchanges like Bitstamp and Bitfinex.
At this point, it is unclear what info crypto holders will be required to file, such as wallet addresses. The report also left out the exact details on when FinCEN would implement the proposal.
Under the existing FBAR rules, failure to comply attracts various penalties such as a hefty $10K fine for non-willful violations and up to 50% of the unreported account balance for deliberate violations. If the proposed FBAR amendment is adopted, crypto holders might be subjected to the same penalties for violations.
The US treasury is ramping up efforts to monitor crypto holdings and transactions. Just weeks before proposing the inclusion of crypto in FBAR rules, the regulator came up with another draconian crypto reporting proposal dubbed the crypto wallet rule.
This earlier FinCEN initiative would force exchanges to store details of all crypto transfers that exceed $3K to any unhosted wallets and report transactions over $10K to the treasury.
The wallet rule has so far drawn the ire of the crypto community, which argues that such broad monitoring of crypto transfers would undermine their right to privacy and stifle growth in the digital assets sector.
FinCEN Rules Could Hinder Crypto Adoption
If both the crypto wallet rule and FBAR proposal are adopted, crypto users in the US would have to report crypto holdings and transactions that exceed $10,000 regardless of where they’re located.
The inclusion of digital currencies in the existing FBAR rules further raises concerns over users’ privacy and threatens to deter mainstream crypto adoption.