The only thing that’s certain in life is death and taxes. For buyers of Bitcoin and other cryptos, the latter has come, as the IRS is now pumping out an avalanche of notices to more than 10,000 cryptocurrency investors who probably haven’t been upfront about their trades. The source of this is Coinbase, which submitted reports for 13,000 accounts under compulsion from a federal court order.
There are probably going to be a lot of worried Bitcoin fans waiting by their mailbox, but the reality is perhaps less severe. According to an article on Forbes, the mail campaign has all the hallmarks of a “scattergun” approach, suggesting that the taxman is not necessarily interested in following up with every individual they reach out to.
Perhaps due to Bitcoin’s relatively unknown status for the majority of its existence, crypto largely escaped the taxman’s watchful eye for several years. That changed after the mammoth 2017 bull run.
The IRS is most interested in any Coinbase accounts whose transaction history exceeds $20,000.
There is a silver lining to this issue, and that is perhaps the government will eventually see the benefit of having an asset run on a blockchain.
Every transaction is viewable and verified, a situation which in theory would make the IRS’s Bitcoin tracking considerably easier. This is just one of the factors that have always made the allegation that BTC is a haven for money laundering largely unfair, as cash is far less traceable than Bitcoin.
Die-hard crypto libertarians will likely want to make Coinbase the bad guy here since the bulk of the data at the IRS’s disposal comes from the massive digital exchange. However, they did fight to protect as many customers as possible.
With a multi-billion dollar valuation that exceeds venture capital darlings like Robinhood, it is impossible for Coinbase not to comply with regulators without risking its place atop the mountain.
Last modified: June 23, 2020 2:40 PM UTC