The IRS expands its cryptocurrency monitoring scope, shifting from targeted investigations to near-real-time blockchain tracking

ChainCatcher news, according to Decrypt, the Internal Revenue Service (IRS) has been continuously expanding its cryptocurrency monitoring scope since 2017, shifting from targeted investigations to near real-time blockchain tracking.

According to tax attorney David Klasing, the IRS obtained user data from multiple exchanges, including Coinbase and Kraken, through "John Doe subpoenas," seizing cryptocurrency worth $3.5 billion in 2021, which accounted for 93% of the total asset seizures that year.

The Treasury Inspector General for Tax Administration (TIGTA) 2024 report shows that among cryptocurrency users identified through exchange data, 75% exhibit potential tax non-compliance. The IRS initiated 216 audits in 2023 and sent nearly 15,000 "soft letters" to users. The new 1099-DA reporting system will be implemented in 2025, requiring the reporting of disposal gains, with additional basis information reporting starting in 2026.

Privacy advocates lost a case in the Supreme Court in July, failing to challenge the legality of the IRS obtaining Coinbase data through subpoenas. Although the Trump administration removed reporting rules for DeFi brokers, centralized exchanges remain subject to comprehensive reporting obligations.