U.S. Government’s Regulatory Efforts on Cryptocurrency
The U.S. government’s efforts to regulate cryptocurrency holdings are advancing as the White House takes a significant step towards establishing rules that would require the Internal Revenue Service (IRS) to monitor American citizens’ foreign crypto accounts. Recently proposed by the Treasury Department, these regulations aim to integrate the United States into a global crypto tax reporting system known as the Crypto-Asset Reporting Framework (CARF). This announcement came late last week when the proposals were submitted for review by the president’s advisors.
Alignment with Global Initiatives
The push for these regulations aligns with earlier recommendations made by the White House which advocated for joining CARF—an initiative developed by the Organization for Economic Cooperation and Development (OECD) in 2022. The framework encourages countries-participants to exchange information on cryptocurrency holdings automatically, assisting in the fight against international tax evasion. Countries including members of the G7 and popular crypto hubs like the UAE, Singapore, and the Bahamas have already committed to this agreement.
Support from Previous Administration
This summer, crypto advisors under the Trump administration released an extensive report endorsing CARF’s implementation in the U.S. market. The advisors argued that adopting CARF would deter American taxpayers from relocating their digital assets to overseas exchanges, thereby fostering a more robust digital asset economy domestically. Furthermore, this initiative aims to mitigate potential disadvantages faced by U.S. digital asset exchanges amid rising global regulatory frameworks.
Considerations for Decentralized Finance
While deliberating on these proposed rules, the White House emphasized that they should not introduce new reporting obligations specifically for decentralized finance (DeFi) transactions. Notably, CARF’s full international rollout is scheduled for 2027, marking a pivotal shift in how countries manage and regulate cryptocurrency investments.
