IRS Seized 3.5 Billion in Crypto as Enforcement Against Tax Evasion Rises
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Since 2017, the IRS has steadily expanded its crypto enforcement, moving from targeted probes to broad “John Doe summonses” against major exchanges like Coinbase, Kraken, Circle, and Poloniex. Using exchange data alongside blockchain analytics, the agency can now build real-time financial profiles of crypto users, leading to $3.5 billion in seizures in 2021 alone. By mid-2023, the IRS had launched 216 examinations and sent nearly 15,000 compliance letters. Experts say enforcement has shifted from an “opt-in” model, where taxpayers self-reported, to an “opt-out” model that assumes non-compliance unless proven otherwise. The new 1099-DA reporting regime, set for 2025 and 2026, aims to fix flawed past reporting but may still create mismatches. Privacy advocates suffered a blow when the Supreme Court declined to hear a challenge to IRS data collection, despite Coinbase warning the agency’s surveillance is akin to a “financial ankle monitor.” While centralized exchanges face heavy reporting obligations, DeFi platforms remain exempt after a Biden-era rule was rolled back. Experts caution that over-enforcement and flawed reporting could alienate compliant users and fuel friction with the crypto community.