After seizing $3.5 billion worth of cryptocurrencies in 2021, the Internal Revenue Service is pulling out the big guns to seize even more in 2022.
The 2021 crypto seizures accounted for 93 percent of all the assets seized by tax enforcement this year so far, according to an IRS report published Nov. 18. And in 2022, the agency could seize cryptocurrency valued at billions of dollars that’s linked to tax fraud and other crimes, according to a critical agency official.
To capture illegal crypto activity, the IRS will be working with VTO Inc., a Colorado-based firm specializing in device forensics, to research and develop techniques for gaining access to crypto wallets, Al Jazeera reported. Through the deal with VTO, the IRS’ Criminal Investigation unit will be working to unlock cryptocurrency wallets so investigators can track the movement of cryptocurrencies and ultimately recover stolen assets as well as prevent theft of digital currency.
The IRS’s criminal unit has already seized billions of dollars worth of Bitcoin and other virtual currencies, including $1 billion stolen from the Silk Road, an online Bitcoin exchange that was shut down in 2013. A former Microsoft Corp. software developer was also prosecuted by the unit for using cryptocurrency to hide $10 million he had embezzled from the company.
“I expect a trend of crypto seizures to continue as we move forward into fiscal year ’22,” IRS Criminal Investigation Chief Jim Lee said in a press conference. “We’re seeing crypto involved in a number of our crimes as we move forward.”
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Congress also made it easier for the IRS to track crypto transactions when it granted the IRS more ability to monitor the transactions through the infrastructure package President Joe Biden signed into law. Under the new law, crypto brokers will be required to track and report transactions to the IRS.
The IRS is cracking down because although cryptocurrencies and wallets are legal, they are often used in ransomware attacks, where criminals demand payment in virtually untraceable Bitcoin, GNC reported.
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