USA Trends and Developments Contributed by: Andrea S Kramer, ASKramer Law
fies and warns the public about firms that could be involved in fraudulent or illegal activities. FinCEN FinCEN is the US Treasury bureau tasked with safe - guarding the US financial system from illicit activity, including crypto theft and ransom payments. FinCEN: • participated in sanctioning an offshore crypto fraud facilitator for pig butchering theft in excess of USD4 billion; • withdrew proposed rules that would have affected un-hosted crypto wallets and travel and record- keeping rules; • pushed back final effective dates for investment advisers to comply with AML rules from 2026 to 2028; • announced a new rule-making process to consider possible rule changes for investment advisers’ AML compliance; and • delivered public service advisories on investment scams and warnings about cryptocurrency kiosks. Ensuring Fair and Predictable Crypto Taxation That Eliminates Tax Compliance Hurdles Crypto tax reporting and compliance is difficult, given the types of digital assets and the wide variety of trans - actions. To add to compliance difficulties, there are few parallels with tax treatment for traditional assets, and the Treasury and IRS have provided limited guid - ance. As types of crypto products and transactions proliferate in the markets, guidance lags behind. Staff cuts across the IRS further complicate the situation. Perhaps in recognition of these hurdles, the PWG rec - ommended that Congress enact comprehensive leg - islation to ensure fair and predictable crypto taxation. In the absence of legislation, the Treasury and the IRS would need to provide whatever guidance they can within the limits of their statutory authority. The PWG directs the Treasury and the IRS to provide sensible and enforceable rules to ensure that crypto transactions are accurately reported. It also instructed the IRS to update its crypto FAQs, which continue to serve as a key source of information about crypto tax compliance.
In line with the administration’s pro-crypto goals, Con - gress passed a Joint Resolution in January to over - turn a broker reporting requirement that would have become effective 1 January 2025. It invalidated the expanded definition of a “broker”, requiring DeFi plat - forms to report to the IRS as commodity exchanges. DeFi platforms are now exempt from broker reporting, but centralised crypto exchanges must comply. The IRS is attacking tax fraud in 2025 by: • increasing its enforcement efforts; • expanding audits; • focusing on crypto reporting and compliance; • targeting tax scams and fraud; • increasing scrutiny of offshore accounts; and • focusing on foreign income reporting. “Operation Hidden Treasure”, originally launched in 2021, remains active and ongoing in targeting tax - payers not reporting their crypto income. IRS agents are receiving special training in crypto logistics and blockchain analytics tools to help identify and find tax - payers that fail to report their crypto income. The IRS, SEC and CFTC are also collaborating on vari - ous crypto regulations, focusing on perpetual swaps, synthetic digital tokens and wrapped digital assets. Conclusion The push-pull dynamic between derivatives regula - tion by enforcement and regulation by rule-making will continue to be driven by crypto derivatives as we move into 2026. We are at a remarkable point in market evolution. It is a rare moment where there is likely to be a regu - latory overhaul of the traditional derivatives markets while crypto derivatives are being folded into that new framework. The less-regulated and less-report - ed crypto derivatives markets are experiencing much faster growth. If the US share of the crypto derivatives markets were to increase even slightly, substantial US economic gains could be made. The President comes from a business background. He sees opportunities and seems undeterred by traditional regulatory frame - works and traditional ways of doing things.
128 CHAMBERS.COM
Powered by FlippingBook