The Foreign Account Tax Compliance Act (FATCA), enacted in 2010, was designed to prevent U.S. taxpayers from hiding assets in offshore accounts. It requires U.S. persons (citizens, residents, and certain entities) to report specified foreign financial assets and mandates foreign financial institutions (FFIs) to disclose U.S. account holder data to the IRS.
Until recently, crypto assets sat in a regulatory gray area. FATCA didn’t explicitly mention digital assets, and enforcement focused on traditional accounts. That changed in 2024 when the IRS proposed expanding FATCA definitions to include “digital assets held with foreign asset providers or self-custodied wallets if connected to foreign exchanges” (IRS Notice 2024-56).
This means that crypto exchanges, DeFi protocols, and wallet providers outside the U.S. could soon fall within the scope of FATCA—especially if they have U.S. customers or counterparties. In this post, we will discuss all things related to FATCA and why it matters for crypto assets.
Key Reporting Requirements Under FATCA Related to Crypto
The core reporting form for individuals and entities is Form 8938 (Statement of Specified Foreign Financial Assets). It must be filed alongside the U.S. tax return if foreign financial assets exceed these thresholds:
Single taxpayers: > USD 50,000 at year-end or > USD 75,000 at any time during the year
Joint filers: > USD 100,000 at year-end or > USD 150,000 at any time
For crypto, reportability depends on custody and control:
Crypto held on foreign exchanges (e.g., Binance, Bitstamp): treated as foreign financial assets if the exchange qualifies as an FFI.
Self-custodied wallets: not directly reportable unless linked to a foreign entity.
DeFi protocols and liquidity pools: currently under review; FATCA’s broad definition of “investment vehicles” may soon include them.
Each report must include:
- Exchange or wallet provider name and location
- Maximum value during the tax year
- Type and quantity of digital asset
- Any associated identifying details (e.g., wallet addresses)
KoinX Books simplifies this by aggregating wallet and exchange data automatically, providing valuation snapshots at any date, and generating reports aligned with Form 8938 thresholds. This ensures no foreign crypto assets are missed in disclosure.
Learn more in our post on How to Download Crypto Tax Reports from KoinX.
Intersection of FATCA and Other U.S. Foreign Asset Reporting Rules
FBAR (FinCEN Form 114) vs FATCA
- FBAR scope: Requires disclosure of foreign financial accounts exceeding $10,000 aggregate at any time in the year. Currently, virtual currency holdings in foreign accounts are not explicitly included under FBAR rules, per FinCEN Notice 2020-2.
- Hybrid accounts trigger: If a foreign account holds crypto plus fiat or securities, that hybrid may be FBAR-reportable. PKF O’Connor Davies+1.
- FATCA and FBAR overlap: Filing one does not replace the other—some accounts may need disclosure under both. IRS+1.
CRS and Global Reporting
The Common Reporting Standard (CRS) is a global exchange framework beyond the U.S., where many jurisdictions share financial account data. In crypto, exchanges with CRS obligations may report U.S. taxpayers’ holdings to their home tax authorities. FATCA operates in parallel but focuses on U.S. tax obligations.
Many taxpayers confuse FATCA and FBAR (Foreign Bank Account Report). Both require disclosure of offshore holdings, but they differ in scope and authority. Here’s a table to help you understand better:
Reporting Rule | Administered By | Reporting Form | Focus | Crypto Inclusion |
FATCA | IRS | Form 8938 | Specified foreign assets | Likely (pending full IRS inclusion) |
FBAR | FinCEN | Form 114 | Foreign bank accounts | Currently excluded, under review |
CRS | OECD | Varies by country | Global information exchange | Adopted by > 100 countries |
If a U.S. person holds crypto in a foreign custodial account that also holds fiat, both FATCA and FBAR may apply. For example, a U.S. DAO treasury using a Singapore-based exchange that allows both USD and BTC deposits could trigger dual filing requirements. The OECD’s CRS and CARF frameworks, now adopted by countries such as the U.K., UAE, and India, expand this further, allowing tax authorities to share crypto-related data globally.
Challenges in Applying FATCA to Crypto
Crypto’s decentralized structure challenges FATCA’s traditional design. Some of the key grey areas that remain are listed below:
Non-custodial wallets: FATCA targets financial intermediaries. But with self-custody, there’s no “foreign financial institution” to report holdings, leaving a compliance gap.
Valuation volatility: Form 8938 requires “maximum fair market value during the year.” For Bitcoin, which ranged from USD 42,000 to USD 73,000 in 2025 (CoinMarketCap, Oct 2025), determining that peak value is complex without automated tracking.
Timing mismatches: Should taxpayers use spot rates at transaction time, or end-of-day averages? The IRS hasn’t clarified, though the 2024 proposed FATCA guidance suggests using “publicly available pricing sources on consistent methodology.”
Enforcement: Penalties for non-compliance can reach USD 10,000 per violation, with an additional USD 50,000 for continued failure after IRS notice (26 U.S.C. §6038D).
Some cases illustrate the risk: in 2024, several U.S. taxpayers were fined for undisclosed offshore crypto holdings on foreign exchanges during FATCA audits.
Without structured systems, manual compliance is nearly impossible for entities managing multiple wallets or subsidiaries. Tools like KoinX Books automate foreign asset tracking, historical value capture, and exchange reconciliation, drastically reducing audit exposure.
To know more about this, check our post on Crypto Accounting Methods 2025: A Comprehensive Guide.
Legal and Tax Implications For Businesses By Jurisdiction
FATCA’s reach extends globally through Intergovernmental Agreements (IGAs) between the U.S. and other nations. Over 115 countries have IGAs, according to the U.S. Treasury (2025).
- Countries with Model 1 IGAs (e.g., U.K., Singapore, India) – local institutions report to domestic authorities, which forward data to the IRS.
- Countries with Model 2 IGAs (e.g., Switzerland, Hong Kong) – institutions report directly to the IRS.
For Web3 businesses, this means compliance obligations differ by jurisdiction.
Example:
- A Delaware-registered DAO with a subsidiary exchange in Dubai (Model 1 IGA country) must report U.S. holder data to local regulators first.
- The same DAO operating through a Swiss SPV (Model 2) would need direct FATCA reporting.
Complicating matters, local data-privacy laws (like GDPR in Europe) sometimes restrict what crypto user data can be shared. Tax professionals must balance FATCA obligations with privacy compliance — an area currently debated in EU courts.
Businesses are advised to:
- Map all entity relationships and wallet jurisdictions.
- Maintain centralized ledgers for FATCA-reportable transactions.
- Obtain annual “maximum value” attestations from exchanges.
- Reconcile with local privacy and AML policies.
Conclusion
FATCA has evolved from a foreign banking rule into a global transparency framework that now extends to crypto asset disclosure. For Web3 founders, CFOs, and tax teams, FATCA compliance isn’t optional; it’s strategic.
Failing to report foreign-held crypto can invite hefty IRS penalties and reputational damage. Yet compliance doesn’t need to be complex. KoinX Books offers end-to-end FATCA support by:
- Aggregating foreign wallet and exchange data
- Converting holdings to USD using verified market feeds
- Generating Form 8938-aligned valuation summaries
- Storing audit-ready historical records
By automating these workflows, businesses transform FATCA compliance from a manual burden into a reliable control process—protecting both investors and management teams from costly oversight.
Frequently Asked Questions
Do I Need To Report Crypto Holdings Under FATCA If They’re In Non-Custodial Wallets?
In most cases, no. FATCA primarily targets assets held through foreign financial institutions (FFIs). A self-custodied wallet that you control directly typically doesn’t qualify. However, the IRS continues to expand its interpretation of “reportable financial assets.” If a non-custodial wallet interacts with a foreign exchange or intermediary, that connection could trigger reporting. Many tax professionals now advise voluntary disclosure for transparency and to stay ahead of evolving guidance.
What Is The Reporting Threshold Under Form 8938 For Crypto Assets?
For single U.S. filers, you must report if the total value of all specified foreign financial assets — including reportable crypto — exceeds USD 50,000 at year-end or USD 75,000 at any time during the year. For joint filers, those limits double to USD 100,000 and USD 150,000, respectively. The key takeaway: FATCA doesn’t separate crypto from other offshore assets. If your combined holdings exceed the threshold, disclosure is required.
How Is The Value Of Crypto Determined For FATCA Reporting?
Use fair-market value based on reputable, verifiable exchange data such as Coinbase, Kraken, or CoinMarketCap on your reporting date. Many firms prefer using a consistent daily average for all assets to maintain audit defensibility and year-over-year comparability. What matters most is applying a consistent valuation method and maintaining clear documentation in case of an IRS review.
What Penalties Apply For Failing To Comply With FATCA Crypto Reporting?
Non-compliance can be costly. The IRS imposes a minimum penalty of USD 10,000 per violation, which can escalate to USD 50,000 for continued failure after notice. In severe cases, willful evasion may result in criminal prosecution. Given the growing IRS focus on digital assets, proactive compliance isn’t just regulatory, it’s risk management.
How Often Should Crypto Holdings Be Reviewed And Reconciled For FATCA Compliance?
At a minimum, conduct a year-end reconciliation before filing Form 8938. But in fast-moving crypto markets, quarterly or even monthly reviews are increasingly standard practice. Automated platforms such as KoinX Books or other tax reconciliation tools can track wallet balances, valuations, and foreign-source transactions in real time — helping ensure you never cross a threshold unnoticed.
