At this week’s IRS tax summit, a crash-course on crypto took shape

On Tuesday, the U.S. Internal Revenue Service (IRS) played host to a group of crypto industry advocates, tax professionals and agency officials for a “Virtual Currency Summit.”

The event saw deep discussion around the issues – both numerous and complex – surrounding cryptocurrency and taxation, as well as calls from some crypto industry stakeholders for more regulatory clarity from the tax authority. Ultimately, the summit was one that will likely go down as a seminal event from the standpoint of American policy development and the eventual impact – likely to be felt over a period of years – on businesses that work with or around the nascent technology.

But there was also something else on display: an educational process for IRS staffers who are still grappling with the implications of cryptocurrency as it relates to their work. Indeed, the summit saw numerous questions on fundamental points, from the nature of the blockchain to the differences between centralized exchanges that handle customer funds to wholly decentralized, non-custodial marketplaces. In essence, the event was a springboard for agency officials who are trying to rapidly get up to speed on the subject – amid tax season, no less.

As The Block previously reported, U.S. agencies are seeking money and additional hires to help bolster their crypto efforts, as shown by the latest federal budget requests. And as this editor posited in a follow-up analysis, the message behind such requests is this: agencies want more in-house expertise on the subject given the growing relevance of crypto to their work.

This isn’t to say that the IRS hasn’t already provided training to its staff. As CoinDesk’s Anna Baidakova reported last summer, staffers received training on identifying whether an investigation subject might own cryptocurrency. Nor was the IRS alone in receiving this training, as the materials in question had been “used around the world to various law enforcement partner audiences and was again given at this forum in a room that included partners from dozens of countries around the world as well as various press members,” according to an IRS representative.

The day’s opening panel served as a useful demonstration on this front. Presented as a “technology update,” the panel – composed of Coinsource genreal counsel Arnold Spencer; Chainalysis global head of policy & regulatory affairs Jesse Spiro; Lukka Applications general manager Robert Materrazi and led by IRS program manager for criminal investigation Kirk Peifer – evolved over time into a back-and-forth about broader issues of regulation and taxation.

The session featured IRS staffers who asked fundamental questions about how the technology works and how different services – from exchanges to wallet providers to bitcoin ATMs – interact with their customers. The overarching theme was taxation and, in particular, the ramifications of different consumer actions (for example: when does a consumer “take possession” of bitcoin for tax purposes?).

But for many of those who stood up and asked questions, the “technology update” quickly became a crash-course on crypto. And over the course of the day – including the panel on exchange issues – IRS staffers were exposed to some of the challenges that are unique to the industry, which is small, globally-focused and operating on the basis of a patchwork of regulations from various governments and jurisdictions.

It’s important to point out that the event itself was not the be-all-end-all of crypto educational processes. From an observer’s perspective, it felt like a starting point and – perhaps much more importantly – a real opportunity for engagement. And while it’s not clear at this juncture whether similar events will take place, it’s clear that the event had an indelible impact on the agency’s crypto work.