Latest notice from FinCEN intends to subject digital currencies held in overseas accounts to Foreign Bank and Financial Accounts Reporting (FBAR) regime. At present, tax-paying citizens in the US with a foreign financial interest that might include a foreign bank account or brokerage account above $10,000 are required to adhere to the FBAR and submit all details of their off-shore account.
The official notice suggested that even though the current FBAR regulations do not account for virtual currencies but the notice did warn that digital assets might come under the jurisdiction of the FBAR. The official notice read,
Currently, the Report of Foreign Bank and Financial Accounts (FBAR) regulations do not define a foreign account holding virtual currency as a type of reportable account. (See 31 CFR 1010.350(c)). For that reason, at this time, a foreign account holding virtual currency is not reportable on the FBAR (unless it is a reportable account under 31 C.F.R. 1010.350 because it holds reportable assets besides virtual currency). However, FinCEN intends to propose to amend the regulations implementing the Bank Secrecy Act (BSA) regarding reports of foreign financial accounts (FBAR) to include virtual currency as a type of reportable account under 31 CFR1010.350.
Crypto Taxation Could Become a Reality in Coming Years
At present digital assets are being reviewed across major countries to see to what level it could be introduced in our current financial systems. Earlier governments did not want anything to do with digital assets and only allowed its trading with certain restrictions. However, now that the demand for digital assets has started to grow where institutions and financial giants have started to hoard, governments are looking to make the most of it by taxing the revenue earned from these assets.
The recent nod for the use of stable coins by the Federal banks is one such step and the recent notice from Fincen indicates government plans to regulate and tax digital assets in coming years.
2021 could prove to be a year where major governments around the globe start formulating clear regulations around cryptocurrencies. The United States seems to be the first among the developed nations to offer more clarity over the use of digital assets. Recently, OCC, the largest banking regulator in the US approved the use of stablecoins and blockchain by Federal banks.