Announced last week amid a crash in prices for cryptocurrencies like bitcoin and ether, the new rules would require any cryptocurrency transfer worth US$10,000 or more to be reported to the Internal Revenue Service (IRS).
The regulations come accompanied by an acknowledgement that “despite constituting a relatively small portion of business income today, cryptocurrency transactions are likely to rise in importance in the next decade, especially in the presence of a broad-based financial account reporting regime”.
“These tougher new rules set out by the US government underscore how cryptocurrencies like bitcoin and ethereum are playing an increasingly dominant role in global mainstream finance,” said Nigel Green, chief executive and founder of deVere Group.
“This has been evidenced by the enormous inflows by retail investors this year as well as considerable – and increasing – interest and demand from institutional investors.”
Mr Green claimed that the Treasury Department’s updated crypto framework is a clear acknowledgement that crypto is here to stay and a clear precursor to wider global regulation around blockchain-based commodities like bitcoin.
“I believe that this is recognition by those running the world’s largest economy that cryptocurrencies, in some form or another, are the future of money. The genie can’t be put back in the bottle,” he said.
The reframing of crypto as a legitimate part of the wider finance ecosystem by the Biden administration is a notable reversal of the stance taken by its predecessor.
The Trump administration said the value of bitcoin was “based on thin air” in 2019, with then US Treasury Secretary Steven Mnuchin going so far as to call cryptocurrencies a national security issue.
In the short term, Mr Green said the announcement of the rules may spook investors, “but in the medium to long term, they should recognise that the move adds further legitimacy to crypto assets and makes the sector more robust, which will, of course, drive prices higher”.
“By ramping up their crypto framework, the Treasury Department is aware that this dominance is only set to grow further in the coming years,” Mr Green said.
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