White House Eyes New IRS Rule to Track U.S. Crypto Activity Offshore

Table of Contents

TLDR

The White House has proposed a rule allowing the IRS to access offshore crypto transaction data.
The proposal aims to improve tax compliance and close existing gaps in crypto oversight.
Digital asset service providers would be required to share transaction information with U.S. regulators.
The rule seeks alignment with the global Crypto-Asset Reporting Framework to enhance tax transparency.
Decentralized finance transactions would remain exempt from the expanded reporting requirements.

The White House has introduced a new proposal that could expand the IRS’s access to data on U.S. taxpayers‘ cryptocurrency activity on foreign platforms. The proposal, now under review by the Office of Information and Regulatory Affairs, seeks to enhance tax compliance and close existing gaps in crypto oversight. This follows a detailed report released earlier in the year that highlighted the need for better regulation of digital assets.

Expansion of IRS Access to Offshore Crypto Transactions

The proposed rule would require digital asset service providers, including foreign exchanges, to share transaction data with U.S. regulators. This would allow the IRS to identify and monitor the offshore activity of U.S. taxpayers. The White House’s initiative aims to align with the global Crypto-Asset Reporting Framework, which is designed to improve tax transparency.

“The U.S. should not fall behind international jurisdictions that already implement similar reporting standards,” said an administration official. The proposed rule is seen as a step toward harmonizing U.S. regulations with global standards. It could help deter U.S. taxpayers from shifting their assets to offshore platforms to avoid tax obligations.

Exempting Decentralized Finance from New Rules

While the proposal calls for expanded reporting requirements, it also makes clear that decentralized finance (DeFi) platforms will not be subject to the new regulations. The White House has stated that reporting rules should not impose extra burdens on DeFi transactions. The administration recognizes the unique structure of decentralized platforms and intends to exclude them from the scope of the new rule.

The IRS would focus its efforts on traditional centralized exchanges and service providers where user data can be more easily tracked. By targeting centralized platforms, the proposal aims to address the most pressing tax compliance issues in the crypto space.

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