Regulation for cryptocurrency has almost every government in the world in a fix. In the United States, regulatory responsibility lies on the shoulder of IRS. Five members of the U.S. House of Representatives recently wrote a letter to the agency asking them to look into the matter more strictly as the current preliminary guidelines leave a lot of questions.
The U.S. House of Representatives have previously asked IRS for further clarification regarding Bitcoin in a similar letter in May of 2017. At that time, the enforcement actions by government agency raised a lot of questions at that time. Notably, Coinbase was under official investigation and was forced to share specific details regarding cryptocurrency holders with the IRS in the process.
Many people consider this, a positive sign for future regulation and the agency could introduce new guidelines regarding virtual currencies. So far, the lack of proper guidelines hinders the chance of offering institutional-grade Bitcoin investment vehicles. This leads to a lot of friction and unrest among enthusiasts and politicians alike.
This is especially important for IRS to expand their enforcement activities. Not knowing what to expect or which rules to follow presents a major issue for cryptocurrency holders. However, it is unclear why is there a delay from the agency’s side in issuing new guidelines for Bitcoin users. Clearly, IRS needs to gear up in regards to cryptocurrency regulations.
The second letter by the Committee may push IRS to present better guidelines for the longer run. In particular, achieving the right balance between regulation and innovation is quite cumbersome, the difficulty is stepped up notches when it comes to Bitcoin and other virtual currencies.
Since 2014, IRS has shown intent to regulate the digital assets. Regulation regarding tax was the major question at the time, however up till 2016 nothing much was sorted and the lack of a comprehensive tax strategy was highly realized. Almost two years later, the progress rate isn’t satisfactory.
While IRS has reiterated that no leniency would be served the taxpayers for not properly reporting the income gained from virtual currency transactions, the taxpayers still need further clarification. The members of the U.S. House of Representatives believes that four years of research is ample time for the IRS and their feedback should be received by mid-October of 2018. The letter states:
We therefore strongly urge the IRS to expeditiously issue more robust guidance clarifying taxpayers’ obligations when using virtual currencies. We also ask that you provide a written response outlining where the IRS is in its efforts to issue updated virtual currency guidance, what the IRS intends to cover in this guidance, and a timeline for its release. In addition, to assist the Committee in better understanding this issue, we will be asking the Government Accountability Office to undertake an audit on this matter.