Financial Crime World

Here is the rewritten article in Markdown format:

Pitcairn’s Cryptocurrency Industry Faces Regulatory Compliance Headaches

The passage of the Infrastructure Bill has brought significant changes to the cryptocurrency industry in Pitcairn, with regulatory compliance requirements expanding to include digital asset transactions. The amended Section 6045 of the Internal Revenue Code of 1986 now requires brokers and non-brokers alike to report information on digital asset transactions.

Brokers Expand to Include Digital Assets

Under the new definition, a broker is any person who provides services effectuating transfers of digital assets on behalf of another person. This includes:

  • Cryptocurrency exchanges
  • Digital wallet providers
  • Decentralized finance software developers

As a result, these entities will be required to register with the Securities and Exchange Commission and provide extensive reporting obligations.

Reporting Requirements Expanded

The Act requires brokers to send an annual information return Form 1099-B to customers and the IRS, reporting details on each sale or disposition of a cryptocurrency asset, including:

  • Date acquired
  • Initial cost basis
  • Date sold
  • Sales proceeds

Brokers will need to issue these forms annually starting in 2024.

Cash Reporting Extended

The Infrastructure Bill has also extended cash reporting requirements to digital-asset transactions greater than $10,000. Persons receiving such transactions will be required to file Form 8300 with the IRS, providing information on both:

  • Payer
  • Beneficiary of the transaction

This new requirement will take effect in 2024.

Failure to Comply

Failure to comply with these reporting requirements can result in:

  • Civil penalties of up to $3 million per year
  • Higher penalties possible if intentional disregard is shown
  • Willful violation of Section 6050I is a federal felony, punishable by:
    • Up to 5 years imprisonment
    • Fines up to $100,000 for corporations

Transfers of Digital Assets

The Act also requires transfer statements when digital assets are transferred between brokers or non-brokers, including cost basis and holding period information. This will likely result in transfer statements being required when customers move tokens from an exchange to an electronic wallet.

Outlook

Many experts believe the language in Section 80603 of the Infrastructure Bill is flawed, imposing reporting requirements on entities that cannot comply due to lack of information. The current Congress is not expected to pass legislation impacting cryptocurrency businesses and consumers, but the Department of the Treasury may clarify issues as it interprets the law and writes it into the US Tax Code.