White House Proposes Americans to Report, Pay Taxes on Foreign Crypto Accounts

In the summer of 2025 the White House proposed that Congress should consider drafting legislation that would force U.S. residents and companies to report foreign digital asset accounts on their taxes. A digital asset is a digital representation of value that is recorded on a cryptographically secured, distributed ledger or any similar technology.
Common digital assets include:

• Convertible virtual currency and cryptocurrency.
• Stablecoins.
• Non-fungible tokens (NFTs).

This White House proposal was one of several proposals outlined in a crypto report published by the President Trump’s Working Group on Digital Asset Markets, a body chaired by White House crypto and AI czar David Sacks (the crypto report).

This crypto report has also laid out policy proposals in several crypto-related areas, including market structure legislation, stablecoins, banking, and illicit finance. Furthermore, the crypto report recommends directing banking regulators to make clearer pathways for crypto banks to engage in traditional banking activities. Also, the report focused on illicit finance, asked FinCEN—a financial crimes-focused organization within the Treasury Department—to evaluate whether the Bank Secrecy Act, a decades-old law requiring financial institutions to assist the U.S. government in rooting out money laundering, should be amended with new language specific to the crypto industry. These proposals, if passed into law, may discourage Americans from moving their crypto offshore and benefit American crypto businesses by promoting growth and use of digital assets in the United States.

Now, considering the crypto report’s recommendations, the White House is currently reviewing a proposed rule that would grant the Internal Revenue Service access to information on U.S. taxpayers’ digital asset transactions conducted in foreign jurisdictions. The rule was received by the Office of Information and Regulatory Affairs in November 2025. This rule, if implemented, would give the IRS a clearer view into cross-border crypto holdings and potential undeclared tax liabilities. Furthermore, the proposed rule would implement the Crypto-Asset Reporting Framework (CARF), an international standard created in 2022 by the Organization for Economic Cooperation and Development. CARF provides for automatic information-sharing across participating jurisdictions to reduce offshore tax evasion involving digital assets, similar to the existing Common Reporting Standard for bank accounts. Time will tell if the Trump administration prepares this policy into legislation needing congressional action and expanding IRS’s authority Americans’ international crypto activities.

In the meantime, several other regulations and guidance from the Treasury Department and the IRS have recently been enacted in relation to digital assets and reporting requirements.

November 2025 Treasury Department guidance allowing crypto exchange-traded products (ETPs) to stake digital assets and share staking rewards with retail investors

On November 10, 2025 the Treasury Department issued new guidance allowing crypto exchange-traded products (ETPs) to stake digital assets and share staking rewards with retail investors. This applies to crypto ETPs that hold or track major digital assets such as Ethereum (ETH), Cardano (ADA), Solana (SOL) – or any other token that can be staked and meets regulatory standards.

What are crypto ETPs and how does staking work?

Crypto ETPs are regulated investment vehicles – similar to exchange-traded funds (ETFs) – that let investors gain exposure to digital assets without holding them directly. They trade on traditional stock exchanges and are often backed 1:1 by crypto held in custody.

Staking, meanwhile, is the process of locking up digital assets on a block chain to help validate transactions in return for periodic rewards, typically paid in the same token. It’s a key feature of proof-of-stake (PoS) block chains like Ethereum, allowing holders to earn passive income while supporting network security.

Compliance Requirements

To qualify, the ETP must follow specific rules –

1) Hold only one digital asset type and cash;

2) Use a qualified custodian to manage keys and execute staking;

3) Maintain SEC-approved liquidity policies ensuring redemptions can occur even with staked assets;

4) Keep arms-length arrangements with independent staking providers; and

5) Limit activities strictly to holding, staking, and redeeming assets—without discretionary trading.

With this new guidance, crypto ETPs can now stake eligible digital assets directly on PoS networks and distribute the resulting rewards to investors, all within a clear, regulated, and tax-compliant framework.

This new guidance also says staking does not trigger extra taxes at the entity level or mess with the product’s tax-friendly status. Now some ETPs can do more than just track a crypto asset, they can also give you staking rewards, which is the extra yield you get for locking up or delegating your tokens to help secure the network. With this new guidance, fund managers have a way to build products that pass on those staking rewards without the same tax complications.

The new guidance builds on Revenue Ruling 2023-14, which outlined how staking rewards are taxed, marking another key step in the Trump administration’s evolving crypto policy and likely resulting in a greater popularity of staking-enabled crypto ETPs, making it easier for everyday investors to get involved. However, you need to remember if you’re an investor that staking rewards comes with tax consequences. For example, if you get rewards—that’s probably ordinary income, right when you receive it, no matter what the trust looks like.

U.S. Penalties for Non-Compliance.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50% of the amount in the account at the time of the violation and may even result in the IRS filing criminal charges.

Civil Fraud – If your failure to file is due to fraud, the penalty is 15% for each month or part of a month that your return is late, up to a maximum of 75%.

Criminal Fraud – Any person who willfully attempts in any manner to evade or defeat any tax under the Internal Revenue Code or the payment thereof is, in addition to other penalties provided by law, guilty of a felony and, upon conviction thereof, can be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than five years, or both, together with the costs of prosecution (Code Sec. 7201).

The term “willfully” has been interpreted to require a specific intent to violate the law (U.S. v. Pomponio, 429 U.S. 10 (1976)). The term “willfulness” is defined as the voluntary, intentional violation of a known legal duty (Cheek v. U.S., 498 U.S. 192 (1991)).

Additionally, the penalties for foreign bank account reporting noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes. For non-willful violations, it is $10,000 per account per year going back as far as six years. For willful violations, the penalties for noncompliance which the government may impose include a fine of not more than $500,000 and imprisonment of not more than five years, for failure to file a report, supply information, and for filing a false or fraudulent report.

Lastly, failing to file Form 8938 when required could result in a $10,000 penalty, with an additional penalty up to $50,000 for continued failure to file after IRS notification. A 40% penalty on any understatement of tax attributable to non-disclosed assets can also be imposed.

Voluntary Disclosure 

Taxpayers who have not reported their crypto currency income and/or gains or who have not reported foreign accounts, are eligible to voluntary come forward to IRS under a Voluntary Disclosure Program which can avoid criminal prosecution and secure a reduction in penalties.  This is a very popular program and we have had much success qualifying taxpayers and demonstrating to the IRS that their non-compliance was not willful.

What Should You Do?

With both the IRS’s and the Treasury Department’s continued focus in the crypto area and commitment of more resources for enforcement, now is the ideal time to be proactive and come forward with voluntary disclosure to eliminate your risk for criminal prosecution, and minimize your civil penalties.  Don’t delay because once the IRS has targeted you for investigation – even it’s is a routine random audit – it will be too late voluntarily come forward.

Take control of this risk and engage a bitcoin tax attorney at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), the Bay Area (San Francisco, San Jose and Walnut Creek) and other California locations.  We can come up with solutions and strategies to these risks and protect you and your business to mitigate criminal prosecution, seek abatement of penalties, and minimize your tax liability.  Also, if you are involved in cannabis, check out what our cannabis tax attorney can do for you.