As government actions rock the cryptocurrency markets, IRS Commissioner Charles Rettig urged senators Tuesday to provide the agency with the congressional authority to require more reporting on cryptocurrency transactions and holders to increase tax collections, suggesting recent proposals by President Joe Biden’s administration could only be the beginning of heightened U.S. oversight of cryptocurrencies.
During a Tuesday congressional hearing, Rettig said the agency “needs congressional authority” and a “clear dictate from Congress” to regulate cryptocurrencies, citing legal challenges the agency has faced (as recently as this year) for requesting records from cryptocurrency exchanges in efforts to ward off tax evasion.
“The authority for us to collect that information is critical,” Rettig said, pointing to a cryptocurrency market capitalization that exceeded $2.5 trillion last month as a contributor to the nation’s growing tax gap.
Closing out the exchange, Sen. Rob Portman (R-Ohio) said Congress wanted to work with him to provide such authority, to which Rettig simply responded: “We would appreciate the opportunity.”
The Treasury Department’s proposed budget for next year contains $32 million for crypto-related enforcement operations and includes a proposal mandating reporting for businesses receiving more than $10,000 in cryptocurrency.
“There are more than 8,600 [crypto] exchanges worldwide, but most virtual currencies are designed to stay off the radar screen, so we will be challenged,” Rettig told Congress. “We need additional tools, and we absolutely need additional resources.”
In May, the IRS kicked off an effort to start criminally investigating potential tax evasion, calling it Operation Hidden Treasure. The agency has been filing court summonses seeking information from crypto exchanges about large transactions that could be subject to U.S. taxes. Similar actions in the past have been successful, such as a subpoena in 2016 that helped the IRS retrieve about $25 million in unpaid taxes, but this year, the agency has faced lawsuits alleging the actions violate the Constitution’s Fourth Amendment, which protects against unlawful search and seizure.
Treasury last month outlined a plan to raise $700 billion over the next decade through new tax enforcement measures, including expanded cryptocurrency reporting requirements. “Despite constituting a relatively small portion of business income today, cryptocurrency transactions are likely to rise in importance in the next decade, especially in the presence of a broad-based financial account reporting regime,” the Treasury report states.
$1.5 trillion. That’s the value of the cryptocurrency market Tuesday afternoon. It tumbled more than 10% in less than 24 hours amid concerns sparked by the Department of Justice’s retrieval of $2.3 million in bitcoin paid as a ransom last month.