The beginning of 2024 has picked up where 2023 left off for US crypto regulation: uncertainty around a new crypto reporting rule, and an enforcement settlement between a key regulator and a well-known industry player.
New Crypto Transaction Reporting Requirement Becomes Effective
On January 1, a long-time IRS reporting requirement officially expanded to include transactions involving digital assets. Internal Revenue Code section 6050I has historically required any person or business that receives greater than$10,000in “cash” in exchange for goods or services to report the transaction on Form 8300. This requirement is meant to prevent money-laundering and tax evasion.
In 2021, The Infrastructure Investment and Jobs Act was passed with a provision that expanded the definition of what constitutes cash for the purposes of filing Form 8300. Under the new definition, “cash” includes, “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology.” As a result, any business receiving Bitcoin or other digital assets of a sum greater than $10,000 in the course of conducting its business will have an obligation to file Form 8300 within 15 days of a transaction.
To file Form 8300, the recipient of the digital assets must obtain the sender’s name, address, tax ID, date of birth, and nature of the sender’s business. The recipient must also provide a written statement to the sender that it will be filing a Form 8300. The transactions are reported to both the IRS and FinCEN. The penalties for not filing can be significant
One of the disappointing aspects of the new requirement is the lack of clarity and education that the IRS has provided to what could be a significant number of taxpayers who are now subject to the rule. We hope that the agency provides more guidance before it begins enforcement
NYDFS Settles with Genesis Global Trading for Violations of BitLicense Requirements
On January 12, Superintendent of NYDFS Harris announced a broad-ranging settlement with Genesis Global Trading over large-scale and continuous violations of the terms of its BitLicense. The consent order described that Genesis failed to meet its obligations with respect to BSA/AML compliance, transaction monitoring, Suspicious Activity Report filings, OFAC screening, and cybersecurity. NYDFS had conducted two full-scope examinations of Genesis’ compliance functions, and in both examinations found widespread deficiencies. NYDFS fined Gensis $8 million, and Genesis will surrender its BitLicense as it ceases operations in NY.
We applaud NYDFS for holding licensees accountable, and we also hope to see the department pursue investigations of firms who are operating in NY without a license
With the SEC’s approvals of the first Bitcoin ETFs last week, we expect regulatory developments in the space to continue unfolding at a steady pace. We will be closely monitoring the sector in the weeks and months to come