In FinCEN Notice 2020-2, the Financial Crimes Enforcement Network (FinCEN) recently stated that it intends to change applicable regulations to make virtual currency reportable on a Report of Foreign Bank and Financial Accounts (FBAR). This development is another indication of the growing popularity of digital money.
Report and currency
Generally, any U.S. person who has a financial interest in, or signatory authority over, any “reportable” foreign financial account must file an FBAR with the FinCEN if the aggregate value of the account(s) exceeds $10,000 at any time during the calendar year. Reportable accounts include bank accounts, securities and other types of financial accounts.
Meanwhile, virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account and/or a store of value. It can sometimes operate like “real” currency — in other words, the coin and paper money of the United States or of any other country that’s deemed legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance. However, virtual currency doesn’t have legal tender status in any jurisdiction.
According to FinCEN Notice 2020-2, current FBAR regs don’t recognize a foreign account holding virtual currency as a type of reportable account. Because of this, a taxpayer isn’t required to file an FBAR reporting that account — unless the account holds assets besides virtual currency.
However, as mentioned, the FinCEN warns account holders in the notice that it intends to amend the FBAR regulations to include accounts holding virtual currency as a type of reportable account under applicable regs.
As of this writing, no specifics are available regarding precisely when the new regs will be issued in either proposed or final form. If you believe this development may affect you, ask your tax advisor for the latest details.
We Can Help
If you need assistance with FBAR reporting, please contact us. We will connect you with one of our advisors.
The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.