If you're a US citizen holding cryptocurrency on a foreign exchange or wallet outside the United States, you could be in violation of federal tax law - even if you never sold a single coin. The IRS isn't just watching your Coinbase account anymore. They're tracking your Bitcoin on Binance, your Ethereum on Kraken, and your stablecoins on any platform based overseas. And if you didn’t report it, you're at risk of penalties that can reach $10,000 per year - not for tax owed, but for simply failing to file the right forms.
What FATCA Actually Requires
FATCA, or the Foreign Account Tax Compliance Act, was passed in 2010 to stop Americans from hiding money offshore. It forces foreign banks and financial institutions to report account details of US citizens to the IRS. If you have foreign financial assets worth more than a certain amount, you must file Form 8938 with your tax return. That includes bank accounts, brokerage accounts, and - increasingly - cryptocurrency holdings held outside the US.The thresholds are different depending on your filing status and where you live. If you're single and living in the US, you need to file Form 8938 if your total foreign assets hit $50,000 on the last day of the year, or more than $75,000 at any point during the year. For married couples filing jointly, it’s $100,000 or $150,000. If you live abroad, the thresholds jump to $200,000 and $300,000 respectively. These numbers aren’t just suggestions. The IRS treats them as legal triggers.
Does Cryptocurrency Count as a Foreign Financial Asset?
The IRS hasn’t written a clear rule saying, “Yes, crypto on Binance counts.” But they don’t need to. FATCA defines “specified foreign financial assets” broadly: any financial account held with a foreign institution, or any financial instrument issued by a non-US person. That covers crypto held on foreign exchanges, custodial wallets, or even through foreign investment funds.Most major crypto platforms outside the US - like Binance, Kraken, Bitstamp, and KuCoin - are treated as Foreign Financial Institutions (FFIs) under FATCA. They’re required to register with the IRS and report US account holders. If you have an account with one of these platforms, it’s likely reportable. Even if the exchange doesn’t send you a 1099, the IRS knows you’re there because the exchange does.
And here’s the catch: You don’t need to own the private keys to be liable. If you hold crypto on a foreign exchange, even for just one day during the year, and the value crossed the threshold, you must report it. It doesn’t matter if you didn’t trade, didn’t earn interest, and didn’t cash out. The asset existed. That’s enough.
FBAR Is Also a Real Risk - and It’s Getting Tighter
FATCA isn’t the only form you need to worry about. There’s also FBAR - FinCEN Form 114. This form has a lower threshold: $10,000 in foreign financial accounts at any time during the year. For years, the IRS said crypto didn’t count toward FBAR. That changed in 2024. Proposed rules from FinCEN now explicitly include cryptocurrency held on foreign platforms as reportable under FBAR.That means if you had $12,000 worth of Ethereum on Binance in March, you now need to file both Form 8938 (FATCA) and FinCEN Form 114 (FBAR). You can’t just file one and ignore the other. The penalties for missing FBAR are brutal: up to $10,000 per violation, and if the IRS says you were willful, it can jump to $100,000 or 50% of the account balance - whichever is higher.
How to Value Your Crypto for Reporting
Crypto prices swing wildly. One day your portfolio is worth $60,000. The next, it’s $40,000. Which number do you use?The IRS says you must use the fair market value at the end of the year - or the highest value during the year if you’re checking whether you crossed the threshold. So if your crypto hit $80,000 in June and dropped to $55,000 by December, you report $80,000 for FATCA purposes. You don’t get to use the lower number to avoid filing.
Most people use CoinGecko or CoinMarketCap for valuation. Some tax software lets you import transaction history and auto-calculate daily highs. But if you’re holding crypto on a small, obscure exchange that doesn’t have public price feeds, you need to document how you arrived at your valuation. Take screenshots of the exchange’s trading page. Save the date and time. Write down the source. The IRS doesn’t require perfect data - but they do require proof you tried.
What If the Exchange Doesn’t Give You an Account Number?
Crypto platforms don’t work like banks. You don’t get a routing number or a physical address. You get a login, a wallet ID, and maybe an email.The IRS knows this. On Form 8938, you can write “Foreign Crypto Exchange - Login: [email protected]” or “Account ID: 789456123” in place of a traditional account number. You can write “Address: Unknown” if the exchange doesn’t list one. They’ve made accommodations for the digital nature of these assets - but only if you try to report them.
Don’t leave fields blank. Don’t write “crypto” without details. The IRS will flag it as incomplete. Fill out what you can. Be honest. Better to report too much than too little.
Don’t Forget Your Capital Gains Reporting
Reporting your crypto holdings on Form 8938 doesn’t replace reporting your trades. Every time you sell, trade, or spend crypto, you trigger a taxable event. You must report those on Form 8949 and summarize them on Schedule D.The IRS uses FIFO (first-in, first-out) as the default method unless you specifically identify which coins you sold. That means if you bought Bitcoin in 2020 for $5,000 and sold it in 2025 for $60,000, you owe capital gains tax on $55,000 - even if you bought more Bitcoin later. No exceptions. No “I didn’t realize it was taxable.”
And yes, even small transactions count. Buying a coffee with Bitcoin? Taxable. Swapping ETH for SOL? Taxable. Earning crypto from staking or airdrops? Ordinary income. You must report it all.
What Should You Do Right Now?
If you’re unsure whether you need to file Form 8938 or FBAR, here’s what to do:- Make a list of every foreign crypto exchange or wallet you’ve used in the past year - even if you don’t use it anymore.
- Find the highest value of your holdings on each platform during the year. Use the exchange’s own records or screenshots.
- Add up the totals. If any single platform exceeded $10,000, you likely need to file FBAR. If your total foreign crypto assets crossed $50,000 (or $100,000 if married), you need Form 8938.
- If you’re over the threshold and haven’t filed, don’t panic. The IRS has a streamlined filing compliance procedure for people who didn’t know they were supposed to report. It’s not free, but it’s far cheaper than an audit.
- Work with a CPA who has experience with crypto and international tax. Most general tax preparers don’t understand FATCA’s application to digital assets. Don’t rely on them.
Why This Matters More Than Ever in 2026
The US has signed agreements with over 100 countries to share financial data under FATCA. More than 300,000 foreign institutions now report to the IRS. Crypto exchanges are part of that system. In 2025, Binance and Kraken began sharing user data with the IRS under these agreements. More platforms will follow.AI-powered tax audits are now scanning crypto transaction patterns across global exchanges. If you’re holding crypto offshore and not reporting it, the odds of getting caught are higher than ever. The IRS isn’t waiting for you to come forward. They’re finding you.
Ignoring this isn’t a strategy. It’s a gamble - and the house always wins.
What’s Coming Next
Expect clearer rules in 2026. The IRS is working on guidance specifically for crypto under FATCA. They may introduce thresholds based on transaction volume, not just asset value. They may require exchanges to issue new forms - similar to 1099s - for foreign holdings.But waiting for clarity is dangerous. The law doesn’t pause while the IRS writes a memo. Your obligation to report exists right now. The only safe move is to assume your crypto is reportable - and act accordingly.
Do I need to report crypto on Form 8938 if I only held it for one day?
Yes. FATCA reporting is based on asset ownership at any point during the tax year, not how long you held it. If your crypto balance crossed the $50,000 (or $75,000) threshold even for a single day, you must report it. The IRS doesn’t care about duration - only presence and value.
What if I moved my crypto from a foreign exchange to a US-based exchange?
Moving crypto from a foreign platform to a US-based one (like Coinbase or Kraken US) removes it from FATCA reporting requirements - but only after the transfer is complete. You still need to report the foreign holding for the period it was overseas. If you held $100,000 on Binance for six months, you report that amount for those months. Once it’s on a US platform, it’s no longer a foreign asset.
Can I avoid FATCA by using a non-custodial wallet on a foreign server?
No. If the wallet is hosted on a server outside the US and you don’t control the private keys, the IRS considers it a foreign financial account. Even if you think you’re “self-custodied,” if the platform manages the infrastructure, it counts. The key is control - if you don’t have full, direct control of the keys and the platform is foreign, it’s reportable.
What happens if I didn’t report crypto last year?
You can still fix it. The IRS has a Streamlined Filing Compliance Procedure for taxpayers who failed to report foreign assets due to non-willful conduct. You’ll need to file amended returns, Form 8938, and FBARs for the past three years, plus pay any taxes owed. Penalties are waived if you’re honest and proactive. Waiting increases your risk dramatically.
Do I need to report crypto if I’m not a US citizen but live in the US?
Only if you’re a US person under IRS rules - which includes citizens, green card holders, and people who pass the Substantial Presence Test (living in the US over 183 days in a year). If you’re on a visa and don’t meet those criteria, FATCA doesn’t apply. But if you’re a resident alien, you’re treated the same as a citizen for reporting purposes.
Interesting breakdown, but I’m still unclear on whether non-custodial wallets hosted on foreign servers count as reportable under FATCA if I hold the private keys myself. The post says ‘if you don’t control the keys’ - but what if the server is foreign but I control everything? Is it still a financial account or just a digital file?
It is imperative that all U.S. citizens comply with their fiduciary obligations under FATCA, regardless of convenience or perceived complexity. The IRS does not entertain ignorance as an excuse, nor should society. Failure to report digital assets held abroad is not a technicality - it is a moral failure in the face of legal duty. The penalties exist for a reason: to deter evasion. Those who seek loopholes are not innovators - they are tax avoiders in the digital age.
You're all missing the real issue. The IRS doesn't need you to file Form 8938 - they already have your data from Binance and Kraken via intergovernmental agreements. The real question isn't whether you should report - it's whether you're stupid enough to think they don't already know. You're not hiding anything. You're just making it easier for them to slap you with a willful penalty because you didn't self-correct. File now, or prepare to explain why you thought you were smarter than a machine that tracks every transaction across 300,000 institutions.
They're using crypto reporting to build a global surveillance state under the guise of tax compliance. The IRS doesn't care about your money - they care about control. They know if you're holding crypto offshore, they know your habits, your timing, your risk tolerance. This isn't about taxes. It's about mapping every financial move of every American. Next they'll require GPS logs of your wallet addresses. Wake up. The digital leash is being tightened, and you're handing them the key
There’s something deeply ironic about requiring citizens to report assets they can’t fully control - like a wallet hosted on a foreign server they didn’t choose. If the platform is foreign, the infrastructure is foreign, and the keys are in your hands - is it really a ‘foreign financial account’ or just a piece of software running on someone else’s hardware? The law hasn’t caught up with the architecture of decentralization. We’re applying 1980s banking rules to 2026 blockchain tech. That’s not enforcement - it’s anachronism.
Let me be crystal clear: If you're a U.S. citizen, you owe allegiance to this country - not to some offshore exchange that doesn't even recognize your citizenship! You think Binance gives a damn about you? They're just a foreign corporation exploiting your ignorance. Reporting isn't optional - it's patriotic. If you're hiding crypto overseas, you're not being smart - you're betraying your country. And if you think the IRS is overreaching, you're the kind of person who thinks the Constitution is outdated. Wake up, America - your tax obligations are your duty, not your burden!