The US Treasury is imposing stricter restrictions on transactions involving cryptocurrency to prevent tax evasion. According to the recent directive, all the investors in the US need to report all cryptocurrency transactions of more than $10,000 to IRS (Internal Revenue Service) for taxation and documentation.
Cryptocurrency loses sheen
The US government enacted the latest initiative after the crypto industry, including Bitcoin (BTC), lost more than $350 billion in the recent massive crash.
The massive crash is in the backdrop of the Chinese announcement of cracking down on cryptocurrencies mining and power failure. China already outlawed cryptocurrencies such as Bitcoin.
FSDC (Financial Stability and Development Committee) in China, on May 22, 2021, said it will tighten the regulations on crypto trading and mining. It will concentrate on reducing credit risks besides imposing severe punishment on those involved in illegal transactions. The crypto participants, who are not aware of a recent law in China, will bear the brunt in the future.
It dealt another blow for bitcoin, which already lost and crashed to the $38,000 region on May 19, 2021. Bitcoin touched a low of $35,383 during intraday trading before recovering to $40,000 two days back.
In April 2021, Bitcoin declined to $52,000 after moving over the benchmark of $60,000. According to experts, a drop in hash rate and expected regulations on crypto are the factors behind this flash crash. Limitations imposed in power usage on crypto mining in China also facilitated the crash.
The US expects to benefits from $700 billion
Unlike China, the US will not ban cryptocurrencies and expects to generate revenues of $700 billion in the next 10 years through tax collections.
It is searching for effective mechanisms to improve tax revenues in the future. IRS will strengthen its resources and manpower with an $80 billion package. As a result, individuals and businesses that engage in the cryptocurrency space will face strict regulations.
According to IRS, several wealthy investors possess sophisticated tools to overcome the radar of tax agencies and indulge in money laundering. IRS received a directive earlier this month from the US district court in California’s Northern District to collect the details of taxpayers that use Kraken.
In the week beginning May 17, 2021, Sichuan’s Aba County-based State Grid directed local enterprises and households to reduce their power usage because of growing power demand.