IRS Investigating Tax Issues of Cryptocurrency Kiosks
Criminal investigators at the Internal Revenue Service are extremely focused on the potential tax issues concerning cryptocurrency kiosks and Bitcoin ATMs, a top agency official said recently. Although no public cases involving bitcoin or other crypto kiosks have been filed to date, IRS Criminal Investigation Chief John Fort said his team is working with its law enforcement partners to police the illicit activity enabled by the technology.
“We’re looking at those, and the ones that may or may not be connected to bank accounts,” Fort told Bloomberg Law on the sidelines of a blockchain conference in New York. “In other words, if you can walk in, put cash in and get bitcoin out, obviously we’re interested potentially in the person using the kiosk and what the source of the funds is, but also in the operators of the kiosks.” These machines, located in many major U.S. cities, allow users to trade fiat currency for a corresponding amount of a particular cryptocurrency and have come under fire in some cases for their potential use by bad actors to launder money. Kiosks will often charge a flat fee for their use, allowing them to take a cut of the cash traded in by customers.
Anti-Money Laundering Regulations
“They’re required to abide by the same know-your-customer, anti-money laundering regulations, and we believe some have varying levels of adherence to those regulations,” he said. The agency is “interested in looking at the compliance issues” related to the people that actually operate the kiosks. Fort said he views cryptcurrency tax issues as an emerging threat, noting that illicit tax activity could come in a variety of forms.
There’s potential for non-compliance in this area, he added, given the inherent lack of transparency and visibility. “We haven’t had any public cases filed, but we do have open cases in inventory” related to cryptocurreny tax issues, he said. The IRS is also turning its attention toward the exchanges where cryptocurrency is traded — both those based in the U.S. and abroad.
“We have concern that as things tighten up here in the U.S., that we are pushing people to foreign exchanges,” Fort said during a speech at the conference. “We have to focus on that as well.”