If you're a U.S. citizen holding cryptocurrency on a foreign exchange or in a wallet managed outside the United States, you might be violating federal tax rules without even realizing it. The IRS isn't just watching U.S. bank accounts anymore. It's tracking digital assets overseas through FATCA - and failing to report them can cost you thousands in penalties.
What Is FATCA and Why Does It Matter for Crypto?
FATCA, or the Foreign Account Tax Compliance Act, was passed in 2010 to stop Americans from hiding money in offshore accounts. It forces foreign banks and financial institutions to report U.S. account holders to the IRS. If they don’t comply, they face heavy fines - so most do. But here’s the catch: FATCA is a U.S. law requiring foreign financial institutions to report accounts held by U.S. persons, with thresholds based on filing status and residency. It applies to any asset classified as a "specified foreign financial asset," including certain digital currencies.
Cryptocurrency wasn’t around when FATCA was written. But the IRS doesn’t care how you store your money - whether it’s in a Swiss bank or a Binance account in Singapore. If it’s held outside the U.S. and meets the value threshold, it’s reportable. That includes Bitcoin, Ethereum, Solana, or any other coin stored on a foreign platform.
When Do You Need to Report Crypto Under FATCA?
The rules change depending on whether you live in the U.S. or abroad - and whether you file singly or jointly.
- If you’re single and living in the U.S., you must report crypto holdings if they exceed $50,000 on the last day of the year or $75,000 at any point during the year.
- If you’re married and filing jointly while living in the U.S., the threshold is $100,000 on the last day or $150,000 at any time.
- If you’re married filing separately, the limit is the same as for single filers: $50,000/$75,000.
- If you live abroad, thresholds are higher - but still apply. For example, single filers abroad must report if holdings exceed $200,000 on the last day or $300,000 during the year.
These thresholds aren’t about how much you earned - they’re about how much you own. Even if you never sold a single coin, if your wallet on a foreign exchange is worth $60,000 on December 31, you owe a Form 8938.
How Is Crypto Treated as a "Foreign Financial Asset"?
FATCA defines "specified foreign financial assets" broadly. It includes:
- Financial accounts maintained by foreign institutions
- Stocks or securities issued by non-U.S. companies
- Financial instruments with non-U.S. counterparties
- Interests in foreign entities
Here’s where crypto gets tricky: Foreign cryptocurrency exchanges are often classified as Foreign Financial Institutions (FFIs) under FATCA if they offer trading services, custody, or financial intermediation to clients worldwide. Platforms like Kraken, Binance, or Bitstamp that operate outside the U.S. and serve American users typically register with the IRS as FFIs.
If the exchange is an FFI, it must report your account balance to the IRS - and you must report it too. Even if the exchange doesn’t send you a 1099 or any statement, you’re still responsible for disclosure. The IRS doesn’t wait for paperwork. It gets data directly from the exchange.
FATCA vs. FBAR: Two Different Forms, One Big Risk
Don’t confuse FATCA with FBAR. They’re separate, and you might need to file both.
FBAR (FinCEN Form 114) is the Foreign Bank and Financial Accounts Report, which requires disclosure of foreign accounts with a combined value over $10,000 at any time during the year. Historically, FBAR didn’t cover cryptocurrency because it was seen as property, not currency.
But that’s changing. In 2025, FinCEN proposed new rules that would explicitly include foreign cryptocurrency accounts under FBAR reporting. If finalized, you’d need to file Form 114 if your total crypto holdings across all foreign platforms hit $10,000 - even if you didn’t sell anything.
So now, if you have $12,000 in Ethereum on Binance (Singapore) and $5,000 in Bitcoin on Kraken (Canada), you’re looking at:
- FATCA: File Form 8938 if total exceeds $50,000 (U.S. resident)
- FBAR: File Form 114 if total exceeds $10,000 (likely required under new rules)
Missing one? That’s two separate penalties - up to $10,000 per form, per year, for non-willful violations. Willful ones? Up to $100,000 or 50% of the account value.
How to Report Crypto on Form 8938
Form 8938 is attached to your annual tax return (Form 1040). It doesn’t ask for transaction history - just the value of your foreign holdings at year-end and peak during the year.
Here’s how to fill it out:
- Identify each foreign platform where you held crypto (e.g., Binance, Coinbase Europe, Bitstamp).
- Calculate the highest value of your holdings on each platform during the year.
- Use the closing price on December 31 for year-end value. For peak value, use the highest price recorded on any day.
- If the platform doesn’t give you an account number or address, write "unknown" or describe the login method (e.g., "Binance account accessed via email: [email protected]").
- Add up all values. If the total meets the threshold, check "Yes" and list each platform on Part I.
Valuation is the biggest headache. Crypto prices swing wildly. One day you’re at $48,000, the next you’re at $52,000. The IRS doesn’t require daily tracking - just the highest and year-end values. Use reputable sources like CoinMarketCap or CoinGecko to document your numbers. Keep screenshots or export logs.
What Happens If You Don’t Report?
The IRS has tools now. It gets data from:
- Foreign exchanges that register under FATCA
- Information sharing agreements with over 100 countries
- Whistleblower tips
- Blockchain analysis firms (like Chainalysis)
If you’re audited and the IRS finds unreported crypto on a foreign exchange, you’ll owe:
- Back taxes on gains (if you sold)
- Penalties for failing to file Form 8938 ($10,000 per year, up to $50,000)
- Penalties for failing to file FBAR (if applicable)
- Interest on unpaid taxes
And yes - they can go back six years. If you held crypto since 2020 and never reported, you’re at risk for penalties on five years of non-compliance.
What About U.S.-Based Exchanges Like Coinbase?
If you hold crypto on Coinbase, Kraken (U.S.), or Gemini - you don’t need to file Form 8938. Those are U.S. entities, so they’re not covered by FATCA.
But here’s the twist: if you move crypto from a U.S. exchange to a non-U.S. wallet (like a Ledger or Trezor stored overseas), that’s still reportable. The rule isn’t about the exchange - it’s about where the asset is held. A hardware wallet in Germany? That’s a foreign asset. A wallet on a U.S.-based exchange? Not reportable under FATCA.
What Should You Do Right Now?
Don’t wait for clearer rules. The IRS isn’t waiting.
Here’s your action plan:
- Inventory all foreign crypto holdings. List every exchange, wallet address, and platform.
- Calculate peak and year-end values for each in USD (use historical prices from CoinGecko).
- Check if totals meet FATCA thresholds. If yes, prepare Form 8938.
- Check if total across all foreign accounts exceeds $10,000. If yes, prepare Form 114 (FBAR).
- File both forms with your tax return - even if you’re not sure. Better to file and pay a small penalty than risk a big one later.
Many people assume "I didn’t sell, so I don’t owe anything." That’s wrong. FATCA isn’t about income - it’s about disclosure. The IRS wants to know what you own, not just what you earned.
Professional Help Is Worth It
Most tax software doesn’t handle crypto FATCA reporting. Even TurboTax doesn’t auto-fill Form 8938 for crypto. If you have more than $25,000 in foreign crypto, hire a CPA or tax attorney who specializes in international crypto compliance.
They’ll help you:
- Classify whether your wallet counts as a "financial account" under FATCA
- Apply the right valuation method
- File amended returns if you missed past years
- Use IRS voluntary disclosure programs to reduce penalties
Don’t try to guess. The rules are vague - and the penalties are real.
What’s Coming Next?
The proposed FBAR changes for crypto are expected to become final in late 2026. Expect:
- Explicit inclusion of cryptocurrency wallets under FBAR
- More foreign exchanges demanding U.S. client info
- IRS audits focused on crypto holdings
- Clearer guidance on valuation methods
By 2027, the IRS may even require quarterly updates. The trend is clear: digital assets are being folded into the same reporting system as Swiss bank accounts.
Do I need to report crypto on FATCA if I never sold it?
Yes. FATCA is about ownership, not transactions. If your foreign crypto holdings exceed the threshold ($50,000 for single U.S. residents), you must report them - even if you never sold, traded, or earned income from them.
What if my crypto is in a hardware wallet stored overseas?
If the wallet is physically located outside the U.S. and you’re the sole owner, it’s likely reportable under FATCA. The IRS considers this a non-account asset held abroad. You’ll need to report its value on Form 8938. If it’s held in a wallet managed by a foreign company (like a custodial service), it’s definitely reportable.
Can I avoid FATCA by moving crypto to a U.S. exchange?
Moving crypto to a U.S.-based exchange like Coinbase or Kraken (U.S.) removes the FATCA reporting requirement - because the asset is now held by a U.S. entity. But this doesn’t erase past obligations. If you held crypto abroad in prior years and didn’t report, you may still need to file amended returns.
What if I don’t know the exact value of my crypto holdings?
Use the highest price recorded on any day during the year (for peak value) and the closing price on December 31 (for year-end). Use trusted sources like CoinGecko or CoinMarketCap. Document your sources. The IRS accepts reasonable estimates - as long as you show you tried to be accurate.
Are NFTs subject to FATCA reporting?
Generally, no. FATCA applies to financial assets - not collectibles. NFTs are considered personal property, not financial instruments, unless they represent ownership in a foreign financial entity (rare). Most NFTs held on foreign platforms don’t require FATCA reporting. But if an NFT is traded on a foreign exchange that functions as a financial intermediary, consult a tax professional.
Next Steps: Don’t Wait for the IRS to Find You
Every year, thousands of U.S. taxpayers get letters from the IRS about unreported foreign assets. Most didn’t know they were required to report. The IRS isn’t trying to trap you - but it will punish ignorance.
If you’ve held crypto on a foreign platform for more than a year, take five minutes today to check your holdings. If you’re over the threshold, get help. File. Correct. Move forward. The cost of doing nothing is far higher than the cost of compliance.