US citizens may need to disclose offshore digital currency holdings soon
The U.S. Department of Treasury is seeking to have U.S. citizens disclose their offshore digital currency holdings in its latest proposed regulation for the industry. Through the Financial Crimes Enforcement Network (FinCEN), the Department intends on amend the banking regulations to include digital currencies.
FinCEN has been quite active in digital currency oversight in the past few months. The agency is tasked with monitoring any violations of financial laws and systems in the country. Digital currencies like BTC, Monero and Dash have in the past been used by a rising number of criminals, necessitating its involvement.
In its latest regulatory measure, FinCEN is proposing that U.S. citizens report if they have more than $10,000 in digital currencies with foreign exchanges, wallets or financial service providers. In its notice, the regulator noted that the current regulations have exempted digital currency reporting.
“Currently, the Report of Foreign Bank and Financial Accounts (FBAR) regulations do not define a foreign account holding virtual currency as a type of reportable account. For that reason, at this time, a foreign account holding virtual currency is not reportable on the FBAR,” the notice stated.
FinCEN is proposing to amend the Bank Secrecy Act regarding reporting of foreign financial accounts to include digital currencies as a type of reportable account.
The FBAR requires citizens to report foreign financial accounts including bank accounts, mutual funds and brokerage accounts to Treasury if they exceed $10,000 at any point during the year. Failure to report attracts penalties, ranging from $1,118 for negligent violation to $86,976 for a pattern of negligent activity.
The proposed law will have a big effect on Americans who trade on foreign exchanges. However, this number has continued to reduce in recent years as more global exchanges exit the American market.
FinCEN’s newest proposed rule comes barely weeks since it proposed yet another law that has raffled feathers in the digital currency industry. The proposal requires financial entities to identify and keep records on transactions above $3,000 involving non-hosted digital currency wallets. While this proposal seems to have upset more than a few entities, it already exists in some jurisdictions like Switzerland.
Already, a number of companies, lobbying groups and individuals have responded to the FinCEN rule to oppose it. They include Jack Dorsey’s payments processor Square, which in a lengthy response claimed the law would “drive cryptocurrency activity away from U.S-regulated services.”
Others who’ve opposed include the Winklevoss twins-led Gemini exchange, Andreessen Horowitz digital currency investment vehicle a16z and the Chamber of Digital Commerce, a blockchain trade association.
See also: CoinGeek Live panel, Regulation of Digital Assets & Digital Asset Businesses
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