IRS Seized $7 Billion in Crypto in 2022
One of the most complex issues within the crypto industry is taxation. While cryptos are a medium of exchange, they are not ‘currency’ in the same way fiat currency is and investments that leverage crypto are also quite complicated. As such, taxing cryptocurrency is a complicated issue around the world.
It is so complicated that the Internal Revenue Service (IRS) in the United States seized about $7 billion in cryptocurrency in 2022 alone. This comes via the annual report from the Criminal Investigation Division of the IRS which says that the amount seized is even double that of 2021.
Uncle Tom Comes for Tokens
While the news of the cryptocurrency seized is mind-boggling in itself, it is not the only crypto-related development coming from the IRS. For years, there has been concern about crypto users not paying their proper taxes. This was as a result of there not being a proper tax code for cryptocurrency or some simply not wanting to pay.
However, it seems that the chickens are coming home to roost. According to Jim Lee, a division chief at the IRS, hundreds of cases are being prepared as they pertain to cryptocurrency. These cases, he explains, include people failing to report crypto income and crypto-to-fiat off-ramping transactions. It was also noted that the IRS’ focus has diversified over the years from being primarily about money laundering to tax-related.
This is being done with the help of the newly-formed Office of Cyber and Forensic Services (CFS) which can track down crypto transactions. For a long time, some crypto holders rested on the fact that digital assets are harder to track than traditional ones and used that as an excuse to avoid taxes. But with the CFS now involved, it seems that the safety net is now gone.
“The CFS is always adding new measures to evolve, particularly as threats evolve in areas like decentralised finance, peer-to-peer payments, and cryptocurrency with improved anonymity. The CFS concentrates on cases where they can make the greatest impact due to very limited resources,” the report says, adding that the CFS works closely with other departments to make sure that if any illicit funds pass through the American financial system, whether as fiat or cryptocurrency, it will be discovered.
Finally, it was mentioned that as web3 is emerging, the IRS is studying it and plans to ‘follow’ criminals into the Metaverse if need be.
The Evolution of Crime
As the report noted, the IRS has been investigating and prosecuting crimes, especially those relating to finance, for over 100 years. In that time, the methods used by tax evaders and criminals have evolved and so have the methods of catching them.
Crypto tax evaders might have had a head start when the technology was still new but the IRS seems to have updated its systems to understand its inner workings. Now, even as the Metaverse is the next frontier for blockchain technology, the IRS has made it clear that there is no hiding place.