IRS Is ‘Raising the Stakes’ on Crypto With Operation Hidden Treasure: Experts

In brief

  • The IRS has a new initiative for seeking out unreported crypto.
  • It’s called Operation Hidden Treasure.
  • Here’s what it means for tax season.

The IRS is launching a new anti-tax fraud initiative called Operation Hidden Treasure, Forbes reports. A joint effort from the IRS’ Fraud Enforcement Office and its Criminal Division, the task force will dig up unreported crypto transactions and hold would-be tax evaders accountable.

Roger Brown, head of tax and regulatory affairs at the crypto data company Lukka, told Decrypt that Operation Hidden Treasure is the IRS’ way of “raising the stakes” when it comes to enforcement.

Since the effort is being jointly handled with the criminal division, said Brown, it’s going to be looking specifically at intentional concealment, rather the kinds of underreporting that might be categorized as civil tax fraud.

“Because it is the Office of fraud and fraud enforcement, and the criminal tax division is doing this and not the normal civil people, they’re looking for evidence of concealment, evidence of intent to not pay what’s owed,” he said. Brown cited money transfers on the dark web, as well as “mixers” and tumbling services that intentionally obscure transactions as potential examples of the kind of behaviors the IRS may target in their investigations.

Crypto payments tend to be pretty private, since they’re pseudonymous, but they’re also paradoxically transparent: everything is publicly recorded on a distributed ledger, which makes transactions easy to trace. Coin mixers are services that scramble the digital paper trail, and are a favorite of criminals looking to launder money on blockchains.

Shehan Chandrasekara, head of tax strategy at the crypto accounting firm Cointracker, said that “cryptocurrency is the worst asset class to evade taxes on because there’s a permanent record of your transactions in the blockchain, unlike cash.”

He also said that since tax fraud has no statute of limitations, Operation Hidden Treasure might uncover old transactions, too; “there’s a lot of tax revenue to gain from this space for the IRS,” he said.

But that isn’t to say you should start freaking out about the small amounts of crypto you may have mistakenly underreported over the years. Brown emphasized that the idea is more to go after the traders who specifically decide not to report gains. “If you just omitted an airdrop from prior year, but you did other reporting, that’s not the kind of thing that’s going to raise fraud issues,” he said.

Stepping up that effort means stepping up the consequences, too. Said Brown: “Penalties and other consequences can be severe.”


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Want to Start Earning Interest on Bitcoin Through BlockFi? You Can’t

In brief

  • BlockFi wasn’t allowing signups for much of Sunday and Monday.
  • The team says it’s working on the issue.

Crypto lending and savings application BlockFi temporarily stopped taking new signups for its service on Sunday evening.

A note at the top of the website currently reads: “NOTE️: New sign ups for BlockFi are temporarily paused. Existing BlockFi clients continue to have full access to the platform. Thank you for your patience as we upgrade our systems.”

However, while the system upgrade already occurred on Monday morning, new signups remained paused.

Neither BlockFi nor its co-founder and SVP of Operations Flori Marquez have responded to a Decrypt request for comment.

There are plausible explanations that are relatively benign.

For instance, in January, crypto and stock trading platform eToro was unable to meet high trading demand. Rather than disappoint existing users, it upped the minimum starting deposit for new users, who had joined in droves and were putting strain on the network. 

Later that month, eToro indicated it might also have to limit how much crypto existing users could buy—not because its systems were overloaded but because there might not be enough liquidity for eToro to buy on customers’ behalf.

Of course, eToro isn’t the only crypto platform to publicly report difficulties. US-based exchange Coinbase also has a habit of going down during periods when there’s a large spike in trading volume. 

BlockFi’s core offering is a kind of savings account for cryptocurrency. Customers receive interest on their deposits of Bitcoin, Ethereum, and a handful of other cryptocurrencies and dollar-pegged stablecoins. It also lets customers put up cryptocurrency as collateral for same-day loans of US dollars. 

The service has grown over the years to keep up with demand for crypto-centric financial products. It expanded into Asia last April, filed papers with the SEC in January of this year to start a Bitcoin trust for accredited investors, and has steadily added new assets to its platform, such as Chainlink.

BlockFi’s also experienced growing pains as it reportedly plans to go public by the end of the year. 

The company took flak last May for taking five days before reporting a data breach that left some users’ personal data open to hackers via SIM swaps. Essentially, hackers fooled mobile phone companies into thinking they owned the numbers of BlockFi users. They then used those numbers to gain access to some personal data via BlockFi, including addresses and activity histories, but not social security numbers and passwords, according to the company.


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Chiliz (CHZ) rallies 60% to a $1B market cap as fan token offerings expand

Non-fungible tokens and decentralized finance are two of the hottest concepts in the crypto sector and each is altering the way projects and companies interact with the public on a wide scale. 

One project that is looking to apply these concepts into a framework for sports fan engagement is Chiliz (CHZ), a blockchain platform created by the Socios fan engagement platform. The project is designed to allow fans to purchase branded Fan Tokens that let them influence their teams through the popular vote.

According to the project website, all Fan Tokens are minted on the Chiliz blockchain with on-platform voting being executed through a series of smart contracts.

Data from Cointelegraph Markets and TradingView shows that over the past month the price of CHZ has increased 760%, going from $0.022 on Feb. 8 to a new all-time high of $0.189 on March 8. CHZ trading volume also hit a 24-hour record at $1.92 billion.

CHZ/USDT 4-hour chart. Source: TradingView

The platform currently offers Fan Tokens for some of the most popular sports teams in the world, including FC Barcelona, Juventus, Paris Saint-Germain, AS Roma, Galatasaray and Atlético de Madrid.

Token launch sparked a strong rally

Momentum for Chiliz began to gather steam at the end of 2020 when the platform partnered with Binance to launch the ACM Fan Token for AC Milan on Feb. 24. the launch generated $6 million in revenue for the CHZ ecosystem.

ACM is part of a network of 23 major sporting and esports organizations that also have plans to work with Chiliz on launching Fan Tokens.

CHZ price received an added boost on March 2 when CEO Alexandre Dreyfus announced that the project would allocate $50 million to expand operations to the United States and there are already plans to start working with local leagues and sports franchises.

VORTECS™ data from Cointelegraph Markets Pro began to detect a bullish outlook for CHZ on March 1, prior to the recent price rise.

The VORTECS™ score, exclusive to Cointelegraph, is an algorithmic comparison of historic and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.

VORTECS™ Score (green) vs. CHZ price. Source: Cointelegraph Markets Pro

As seen in the chart above, the VORTECS™ score hit a high of 66 on March 1, less than 5 hours before the price of CHZ began to break out above $0.06. Following the price rise and consolidation above $0.11, the VORTECS™ score climbed to 69 on March 6, two days before the price surged to a new all-time high.

Currently, Chiliz is in ongoing talks with Formula One and if the team is able to onboard popular U.S. sporting teams, the project could be well-positioned to see further growth as blockchain technology and NFTs become more ingrained with the sports industry.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.