Do I need to report crypto held on foreign exchanges?

Yes, cryptocurrency held on foreign exchanges likely needs to be reported through multiple channels, and the reporting landscape continues to evolve. Here is a summary of current obligations.

FBAR Reporting: While not yet formally required by a final rule, FinCEN has proposed including virtual currency accounts at foreign exchanges within FBAR requirements. The conservative approach, recommended by most tax professionals, is to include foreign crypto exchange accounts in your FBAR if your aggregate foreign account balances (including crypto) exceed $10,000 at any time during the year.

FATCA Form 8938: The IRS has indicated that virtual currency held in accounts at foreign financial institutions may be a specified foreign financial asset reportable on Form 8938. If your total foreign financial assets exceed the applicable threshold ($200,000 year-end for single expats), include your foreign crypto exchange balances.

Form 1040 Digital Asset Question: Starting with the 2024 tax year, Form 1040 includes a question asking whether you received, sold, exchanged, or otherwise disposed of any digital assets during the year. You must answer this question truthfully regardless of where the assets are held.

Transaction Reporting: All gains, losses, and income from cryptocurrency transactions must be reported on your US tax return regardless of which exchange the transactions occurred on. Foreign exchanges are not required to issue 1099 forms to US customers, but your obligation to report the income exists independently.

New Broker Reporting Rules: Under the Infrastructure Investment and Jobs Act, centralized crypto exchanges (including some foreign ones that serve US customers) will eventually be required to issue Form 1099-DA (Digital Asset) reporting proceeds from crypto sales. This is expected to begin for the 2025 or 2026 tax year.

Practical steps: maintain your own transaction records regardless of what the exchange reports, use crypto tax software that can connect to your foreign exchange accounts via API, and report conservatively on FBAR and FATCA. At Zenith Financial, we stay current on the evolving crypto reporting requirements to ensure your filings are complete and compliant.