In addition to publishing more guidance on cryptocurrencies, the IRS is cracking down on cryptocurrency tax fraud occurring on exchanges and blockchain.

Back in 2016, the IRS issued a subpoena to Coinbase, requiring the exchange to turn over customer records to the federal government.

The tax laws against centralized exchanges will only get tougher in the coming years. The 2021 Build Back Better Act requires cryptocurrency exchanges to issue mandatory 1099 forms reporting capital gains and losses to both customers and the IRS.

Of course, the IRS is not limited to centralized exchanges. In recent years, the IRS has paid more attention to tax fraud on the chain.

The IRS is now partnering with contractors like Chainalysis to analyze blockchain and match “anonymous” wallets with known investors. It is estimated that these partnerships have helped the IRS seize more than $10 billion in bitcoins.

In addition, the federal government is taking active steps to deter investors from using private coins that could potentially be used for tax evasion. In 2022, the Treasury Department imposed sanctions on the privacy-focused Tornado coin, making its use illegal for Americans.