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Digital assets and tax transparency: Navigating the new US tax reporting regime
Journal of Financial Compliance,
8
(3),
257-270
(2025)
Abstract
The US digital asset industry has been growing at a significant pace since 2012 when the first mainstream digital asset exchange offered the opportunity for customers to buy and sell the first digital asset, bitcoin, through bank transfers. Digital assets, or ‘cryptocurrency’ as it is commonly known, quickly outgrew its status as a niche alternative investment. According to a Pew Research Center survey, almost 20 per cent of American adults owned cryptocurrency in 2023.1 Along with growth in popularity, bitcoin (the original cryptocurrency) has grown in value. On 31st December, 2012, the closing price for a single bitcoin was US$13.45, compared to its all-time high of US$108,135 (as of 17th December, 2024). Based on this, it is fair to assume that long-term investors made some significant gains in bitcoin trading. Since digital asset exchanges are not subject to the same tax information reporting requirements as traditional financial institutions, there has been speculation by digital asset investors that sales of digital assets were not subject to the same taxation regimes as traditional financial investments. The US Internal Revenue Service (IRS) issued its first notice regarding the taxation of ‘virtual currency’ in 2014 (Notice 2014–21).2 The exclusion of tax information reporting guidance on digital asset sales, however, made it difficult for the IRS to identify taxable gains recognised by investors. This paper will set the stage by first diving into the history of both US tax information reporting and the evolution of digital assets. We will then address the recent US tax legislation and regulations issued by the US Government to attempt to mitigate the perceived tax gap for digital asset sales. We will then conclude by highlighting the challenges that these rules pose to digital asset exchanges and taxpayers, and what we can collectively do to prepare for their implementation.
Keywords: social media risk; regulatory compliance; records and information management; marketing rules; consumer duty
The full article is available to subscribers to the journal.
Author's Biography
Jill Dymtrow has specialised in tax information reporting and withholding (IRW) since starting her career at PricewaterhouseCoopers (PwC) in 2000. After working with offshore banks enrolled in the US Internal Revenue Service Qualified Intermediary Programme, as well as large US withholding agents participating in the Section 1441 Voluntary Compliance Programme, Jill left PwC to start a technology and consulting company, Compliance Technologies International (CTI), focused on the automation of IRW compliance. After the sale of CTI to IHS Markit (now S&P Global), Jill joined Moss Adams to start an IRW practise and continued serving clients in various industry segments. In 2021, Jill joined Gemini, a digital asset exchange, and currently leads Gemini’s IRW group responsible for reporting US and foreign digital asset exchange activity, as well as the nonfungible token platform Nifty Gateway. Her extensive experience, including guiding companies through highly technical and complex compliance issues involving Internal Revenue Code Sections §§1441 and 3406, the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS), as well as working through developing IRW regimes specifically for digital assets, remains unique in the industry today.
Chris Saveri is the global head of tax at Gemini, a digital asset exchange, and oversees the global tax function of the company, including, but not limited to, income tax compliance, indirect taxes, tax controversy, tax accounting for financial reporting, FinCen compliance and tax planning/structuring. He is also a regular participant and panellist for updates/developments at digital asset industry and tax events, primarily in the New York area. Prior to his time at Gemini, Chris spent 13 years at Ernst & Young (EY) in the banking and capital markets practise within the financial services industry, assisting clients with income tax compliance and consulting needs. Around 2016, he began focusing more in the digital asset and broader financial technology (FinTech) industries and worked with entrepreneurs and start-ups navigating the nascent regulatory landscape around this evolving area. Aside from advising clients, he participated in FinTech industry initiatives, led panel/educational discussions and seminar, and was a client–server liaison for EY’s Entrepreneur of the Year programme. Subsequent to EY and prior to Gemini, Chris was the global head of tax at Digital Currency Group leading all aspects of the tax function for the company and its operating subsidiaries. Chris is a Certified Public Accountant in the USA with licensure in New York and New Jersey. His tax expertise in the digital asset industry stemming from both public accounting and private industry experience is a rare skill set in this growing space.
