The use of cryptocurrency in the U.S. cannabis industry has been on the rise, and the country’s tax agency is keeping a close eye. The Internal Revenue Service (IRS) has issued a new notice claiming that the use of digital currencies in this industry is a ‘top enforcement priority for the agency. Several financial regulators have expressed similar concerns in different countries.
The use of cryptocurrency in the cannabis industry is a matter of concern.
Medical cannabis is now legal in over 35 states, with 17 legalizing it for recreational use. However, despite the changing laws, the legacy banking system still shuns companies operating in this sector. This has led them to explore alternatives, and digital currencies have been on top of the list. The IRS is keen on taxing gains made by cannabis companies through the use of digital currencies. In a recent notice, IRS Small Business Division Commissioner De Lon Harris offered guidance for the first time on this emerging sector.
The U.S. has toughened its rules governing crypto exchanges in recent times.
“Another of our top enforcement priorities in the cannabis industry is the use of cryptocurrency. Those who use it need to understand that the IRS considers it property, and there are gains that are taxable,” De Lon Harris wrote. The commissioner also advised cannabis companies to ensure they work with reputable crypto exchanges in their digital currency dealings. The U.S. has toughened its rules governing exchanges in recent times, with some like Coinbase almost attracting the wrath of the securities regulator while others like BitMEX and Kraken have had to pay penalties for their crimes.