Do I need to report foreign cryptocurrency on FBAR?

The reporting of foreign-held cryptocurrency on FBAR is an evolving area of law that has undergone significant changes. As of 2024, FinCEN has issued a proposed rule that would explicitly include virtual currency held in foreign accounts within FBAR reporting requirements, though the final rule has not yet been finalized.

Historically, FinCEN had not formally required virtual currency to be reported on FBAR. However, in 2020, FinCEN issued a notice indicating its intent to propose rules requiring the reporting of virtual currency accounts, and the IRS has signaled that it expects such reporting. The FinCEN BSA E-Filing system already includes a field for 'other' account types that could be used to report crypto accounts.

As a practical matter, if you hold cryptocurrency on a foreign exchange (such as Binance, Kraken's non-US platform, or other non-US crypto platforms), it is increasingly advisable to include those accounts on your FBAR as a conservative compliance measure. The account value would be the fair market value of all cryptocurrency held in the account at its maximum during the year, converted to US dollars.

Cryptocurrency held in a private wallet (hardware or software wallet) is generally not reportable on FBAR because a personal wallet is not an account at a financial institution. However, if a foreign entity provides custodial wallet services, that could potentially be considered a foreign financial account.

Regardless of FBAR treatment, cryptocurrency transactions have clear US tax reporting requirements. You must report gains and losses from crypto sales, exchanges, and other dispositions on Form 8949 and Schedule D. Crypto income from staking, mining, airdrops, and DeFi activities is taxable and must be reported on your tax return.

Given the rapidly changing regulatory landscape around cryptocurrency and international reporting, we recommend a conservative approach: report foreign crypto exchange accounts on FBAR, ensure all transactions are properly reported on your tax return, and stay informed about new FinCEN guidance.