The U.S. government has asked executive branch employees who own or trade cryptocurrencies to disclose their holdings. The U.S. Office of Government Ethics (OGE) released a circular yesterday stating that employees who have crypto holdings worth more than $1,000 or have realized income of more than $200 from trading them are required to disclose this information.
According to the agency, government employees had “increasingly” sought guidance from ethics officials regarding financial-disclosure reporting obligations after cryptocurrencies exploded in popularity in recent years. “Virtual currency is an investment asset and, like other property held for investment, it may create a conflict of interest for employees who own it,” the OGE wrote in its advisory. (See also: Bitcoin Has a Regulation Problem.)
Even as their trading markets have surged in recent years, cryptocurrencies have remained in murky legal territory largely due to the growing list of scandals and scams associated with them. Regulatory agencies have also adopted differing approaches to classifying cryptocurrencies. While the Internal Revenue Service classifies and taxes them as property, the Commodity Futures Trading Commission treats them as commodity for trading purposes. (See also: How the New Tax Law Affects Cryptocurrencies.)
Siding With the IRS
The OGE has followed IRS guidance in the matter. “OGE therefore regards a holding in virtual currency as an interest in property held for investment or the production of income. Consistent with the reporting requirements in the EIGA [Ethics in Government Act of 1978] and OGE’s regulations, such an interest must be reported on an employee’s public or confidential financial disclosure report if it meets the income or value reporting thresholds for such property,” the agency stated.
But the OGE left the door open for further evolution of its guidance regarding cryptocurrencies. "Given the evolving nature of virtual currency, other regulatory agencies may issue additional findings or guidance that provide further insight into how these assets should be treated for the purposes of the EIGA,” the agency stated.
Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin and litecoin.