Clarity on Whether Cryptocurrency Must be Reported on the FBAR

A vexing question has been whether or not foreign cryptocurrency exchanges must be reported on the FBAR. At a conference in 2019, a representative from FINCEN said no; however, the instructions on the FBAR imply they should be reported.

At the very end of December, FINCEN issued Notice 2020-2:

Currently, the Report of Foreign Bank and Financial Accounts (FBAR) regulations do not define a foreign account holding virtual currency as a type of reportable account. (See 31 CFR 1010.350(c)). For that reason, at this time, a foreign account holding virtual currency is not reportable on the FBAR (unless it is a reportable account under 31 C.F.R. 1010.350 because it holds reportable assets besides virtual currency). However, FinCEN intends to propose to amend the regulations implementing the Bank Secrecy Act (BSA) regarding reports of foreign financial accounts (FBAR) to include virtual currency as a type of reportable account under 31 CFR 1010.350.

So today a foreign cryptocurrency exchange that has solely cryptocurrency does not have to be reported on the FBAR. However, let’s say you use HypotheticalForeignCrypto.com, and you had any ‘cash’ balance of any fiat currency in your account during the year and you otherwise meet the FBAR filing requirements; that account would have to be reported.

Additionally, this does not change the FATCA (Form 8938) reporting rules. For purposes of IRS Form 8938, a foreign cryptocurrency exchange still must be reported.

Finally, it’s clear from the notice that FINCEN will soon be issuing a regulation that states that a foreign cryptocurrency exchange must be reported. That likely won’t impact 2020 FBARs but will probably impact 2021 FBARs (filed in 2022).

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