The White House is advancing a regulatory proposal that would allow the U.S. Internal Revenue Service (IRS) to monitor American taxpayers’ cryptocurrency activities held on exchanges and wallets outside the country. The initiative stems from efforts to align U.S. policy with global tax transparency standards.
On Friday, the proposed rule was submitted to the Office of Information and Regulatory Affairs (OIRA), which is part of the Office of Management and Budget. OIRA’s role is to review federal regulations, ensuring they align with the administration’s policy objectives.
This move follows the White House’s broader digital asset strategy, published earlier this summer, which recommended implementing rules based on the Crypto-Asset Reporting Framework (CARF). Developed by the Organisation for Economic Co-operation and Development (OECD), CARF is designed to facilitate the automatic exchange of information about digital asset transactions across international tax authorities.
Under the framework, the IRS would receive data on U.S. taxpayers’ crypto transactions from foreign providers, while other jurisdictions would likewise obtain information about their residents’ activity on U.S.-based platforms. According to the White House, enforcing CARF could discourage U.S. residents from shifting assets to offshore exchanges, promote onshore crypto usage, and level the playing field for U.S.-based trading platforms.
At the same time, the administration is recommending that new rules should not impose additional reporting duties for decentralized finance (DeFi) transactions.
Why It Matters
- Tax compliance and deterrence: By collecting data on overseas crypto holdings, the IRS could more effectively enforce tax obligations and reduce the incentive to hide digital assets offshore.
- Global alignment: CARF aims to standardize how governments collect and share crypto-asset tax data.
- Regulatory balance: The proposal avoids creating new burdens for DeFi platforms, ensuring reporting responsibilities primarily affect centralized services.
Broader Context
The plan builds on earlier IRS and Treasury regulations targeting crypto brokers. Currently, U.S. exchanges and custodial wallet providers must report transactions to the IRS through a new form, 1099-DA, starting with trades in 2025. These rules deliberately delay reporting for non-custodial actors (like DeFi platforms) to allow further review.
Notably, the proposed CARF regulations would be coordinated with existing U.S. reporting rules, particularly for foreign brokers. In some cases, non-U.S. platforms that already exchange information under CARF could be exempted from duplicate IRS reporting.
Challenges Ahead
- Complex implementation: Translating CARF into U.S. law involves many legal, technical, and diplomatic complexities.
- Privacy and cost concerns: Broad reporting raises questions about data privacy, infrastructure costs, and administrative burdens for both providers and taxpayers.
- Political pushback: Some lawmakers and industry groups worry the new regime goes too far, while others argue it still does not go far enough to catch tax evasion.
If finalized, this proposed rule could significantly expand the IRS’s reach into international cryptocurrency activity, strengthening tax enforcement while aligning the U.S. with global standards. Though challenges lie ahead, especially around implementation and safeguards, the move underscores how seriously the U.S. government is taking crypto’s role in the modern tax system.
