Warren, Casey, Blumenthal, Sanders Call on Treasury, IRS to Rein in Crypto Tax Evaders, Close $50 Billion Crypto Tax Gap
“We urge you to act swiftly to implement strong tax reporting rules for cryptocurrency brokers”
Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.), Bob Casey (D-Pa.), Richard Blumenthal (D-Conn.), and Bernie Sanders (I-Vt.) sent a letter to the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS), urging them to quickly propose and implement strong rules that close loopholes exploited by crypto tax evaders.
In November 2021, Congress passed the Infrastructure Investment and Jobs Act (IIJA), which directed Treasury and IRS to implement new rules requiring third-party crypto brokers to report relevant information on sales, gains, and losses to the IRS. Congress directed Treasury to implement these new rules in time for the 2024 tax filing season.
“Nearly two years have passed since the law was enacted, and the implementation deadline is less than six months away – but Treasury has yet to publish proposed rules,” wrote the lawmakers. “Without quick action, your agencies are at risk of failing to meet their congressionally-mandated deadlines for implementation of a final rule.”
While the figure may be much higher, studies suggest that there is at least a $50 billion crypto tax gap. According to the Joint Committee on Taxation, if Treasury and the IRS do not implement these new rules in time, they risk missing out on roughly $1.5 billion in tax revenue for the 2024 fiscal year.
“Given the chance, tax evaders and the crypto intermediaries willing to aid them will continue to game the system, exploit loopholes, and siphon off billions of dollars a year from the U.S. government,” concluded the lawmakers. “You must not give them that chance.”
The lawmakers are urging Treasury and the IRS to act swiftly to publish and implement these new rules ahead of the December 31, 2023 deadline and provide a response to their letter no later than August 15, 2023.
Senator Warren has been an outspoken advocate for regulation and oversight of crypto to rein in unchecked illegal activity, and protect consumers and the safety and stability of the financial system:
- On July 28, Senator Warren, along with Senators Roger Marshall (R-Kan.), Joe Manchin (D-W.Va.) and Lindsey Graham (R-S.C.), reintroduced the Digital Asset Anti-Money Laundering Act, legislation that would mitigate the risks that digital assets pose to our national security by closing loopholes and bringing the digital asset ecosystem into greater compliance with the anti-money laundering and countering the financing of terrorism (AML/CFT) frameworks governing the greater financial system.
- On July 21, 2023, at a hearing, Senator Warren warned about the national security risks of rogue states using crypto to evade sanctions and fund their weapons programs, spying, and cyberattacks – calling out North Korea for stealing over $3 billion in crypto over the past 5 years, and using proceeds to fund its illegal nuclear weapons program,
- On June 8, 2023, Senators Warren and Van Hollen sent a letter to Attorney General Merrick Garland asking the Department of Justice (DOJ) to investigate the crypto exchanges Binance and Binance.US for potentially making a series of false statements to Congress.
- In May 2023, a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren called out crypto’s role in fueling the fentanyl crisis and announced she will reintroduce her bipartisan Digital Asset Anti-Money Laundering Act, a bill that would close loopholes in anti-money laundering rules, cutting off drug suppliers and cartels from using crypto to facilitate their illegal business.
- In May 2023, at a hearing of the Senate Armed Services Committee, Senator Warren questioned senior intelligence officials about crypto’s threats to national security as the method of choice for countries to evade sanctions and fund weapons programs, support spying, and promote cyber attacks.
- In February 2023, at a hearing of the Senate Committee on Banking, Housing, and Urban Affairs, Senator Warren raised concerns that key parts of the crypto industry are not subject to the same money laundering laws that cover other financial organizations, allowing financial criminals to use crypto to launder billions.
- On December 14, 2022, Senators Warren and Roger Marshall (R-Kan.) introduced the Digital Asset Anti-Money Laundering Act of 2022, bipartisan legislation that would mitigate the risks that cryptocurrency and other digital assets pose to the United States’s national security by closing loopholes in the existing anti-money laundering and countering of the financing of terrorism (AML/CFT) framework and bring the digital asset ecosystem into greater compliance with the rules that govern the rest of the financial system.
- On December 8, 2022, Senators Warren and Tina Smith (D-Minn.) sent letters to three key banking regulators to raise concerns about the ties between the banking industry and crypto firms.
- On December 6, 2022, Senators Warren, Marshall, and John Kennedy (R-La.) wrote to Silvergate, the bank that reportedly facilitated the transfer of FTX customer funds to Alameda Research, seeking answers about the bank’s role in the loss of billions of dollars in customer funds.
- On November 30, 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren called on regulators to keep crypto out of the banking system following FTX’s collapse.
- On November 23, 2022, Senators Warren and Sheldon Whitehouse (D-R.I.) sent a letter to the Department of Justice requesting personal accountability for former FTX CEO Sam-Bankman Fried and any complicit FTX executives for wrongdoing following the exchange’s collapse.
- On November 22, 2022, Senator Warren published an op-ed in the Wall Street Journal urging federal regulators to use their expansive authorities to crack down on crypto fraud and hold the industry to the same basic standards as other financial activities.
- On November 17, 2022, Senator Warren, along with Senator Dick Durbin (D-Ill.), sent a letter to Sam Bankman-Fried, founder and former CEO of FTX Trading Ltd. (FTX), and John Jay Ray III, the newly appointed CEO of FTX, seeking information on the reported misuse of billions of dollars of customer funds and other disturbing allegations that continue to emerge about the company’s fraudulent and illicit practices.
- On October 25, 2022, Senators Warren and Whitehouse and Representatives Alexandria Ocasio-Cortez (D-N.Y.), Jesús “Chuy” García (D-Ill.), and Rashida Tlaib (D-Mich.) sent a letter to the U.S. Securities and Exchange Commission, the Commodity Futures Trading Commission, the U.S. Department of Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau, seeking information about the steps each regulator is taking to stop the revolving door between financial regulatory agencies and the cryptocurrency industry.
- In September 2022, Senator Warren sent a letter to Treasury Secretary Janet Yellen calling on the Treasury Department and the Financial Stability Oversight Council to build a strong regulatory framework for the crypto market.
- In July 2022, Senator Warren and her colleagues released the findings from an investigation into seven large cryptomining companies – showing extraordinarily high energy use and climate impacts from cryptomining – and called on the EPA and DOE to take action.
- In May 2022, Senators Warren and Smith, sent a letter to Fidelity, asking the company to explain its decision to allow Bitcoin investments for 401(k) plans, despite the Department of Labor’s warnings about 401(k) crypto investments.
- In March 2022, Senator Warren, Senate Armed Services Committee Chair Jack Reed (D-R.I.), Senate Intelligence Committee Chair Mark Warner (D-Va.), and Senate Defense Appropriations Subcommittee Chair Jon Tester (D-Mt.) introduced the Digital Asset Sanctions Compliance Enhancement Act to ensure that Vladimir Putin and Russian elites don't use digital assets to undermine the international community’s economic sanctions against Russia following its invasion of Ukraine.
- In March 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren highlighted the various cryptocurrency tools that could make it easier for sanctioned individuals to hide their wealth and lessen the impact of Russian sanctions.
- In March 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren warned that cryptocurrency may allow Russia to dodge sanctions and urged stronger regulation of the crypto market to ensure that countries, drug traffickers, cyber criminals, and tax cheats can’t evade economic pain.
- In March 2022, Senators Warren, Warner, Reed, and Sherrod Brown (D-Ohio), Chair of the Senate Banking, Housing, and Urban Affairs Committee, sent a letter to Treasury Secretary Janet Yellen, asking about the Treasury Department’s plans to enforce sanctions-compliance guidance for the cryptocurrency industry to ensure that economic sanctions remain an effective tool for achieving foreign policy goals.
- In December 2021, during a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren raised concerns over the growing risks presented by stablecoins.
- In September 2021, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren called on regulators to step up to address crypto's regulatory gaps and ensure an inclusive financial system.
- In July 2021, Senator Warren sent a letter to SEC Chair Gary Gensler requesting information about the agency's authority to regulate cryptocurrency exchanges and protect consumers from risks posed by the highly volatile cryptocurrency market.
- In June 2021, chairing a hearing of the Senate Banking, Housing, and Urban Affairs Committee's Subcommittee on Economic Policy, Senator Warren delivered remarks on the opportunities and risks that digital currencies present.
- In a June 2021 interview, Senator Warren called the market for crypto the “wild west,” and said digital currency is “not a good way to buy and sell things and not a good investment and an environmental disaster.”
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