Tax authorities want to take a closer look at cryptocurrencies

The American federal tax authority wants to take action against anonymity in the crypto space. The focus is particularly on privacy coins and layer two solutions as well as sidechain projects.

America’s tax authority – Internal Revenue Service (IRS) – sees the ability to disguise cryptocurrency capital transactions as a problem. The federal authority is looking for tools and information on how it can better understand crypto transactions. In particular, one would like to take a closer look at privacy coins, i.e. cryptocurrencies with particularly high privacy. The same applies to layer two protocols such as the Bitcoin Lightning Network and the sidechain project OmiseGo.


Prototype wanted for monitoring

The U.S. Treasury Department announced a tender on June 30 to help develop a prototype for crypto-tracking. The software should be able to evaluate various distributed ledger transactions. Under the title “Pilot IRS Cryptocurrency Tracing”, the main target is the best-known representatives of the privacy coins: Monero (XMR), Zcash (ZEC), Dash (DASH), Grin (GRIN), Komodo (KMD), Verge ( XVG) and Horizon (ZEN). Among other things, the software should be able to cluster transactions from individual users so that databases with suspicious wallet addresses can be created. You also want to be able to release the data to various law enforcement agencies.