At LA Tech Week 2025, I attended a critical session on international crypto taxation that every accountant needs to understand: U.S. taxpayers with crypto on foreign exchanges face reporting obligations most don’t know exist.
The penalties for non-compliance are SEVERE - up to $100,000 per year or 50% of account value. This is not optional.
The FBAR Question: Do Crypto Accounts Require Reporting?
FBAR = Foreign Bank Account Report (FinCEN Form 114)
Requirement: U.S. persons must report foreign financial accounts exceeding $10,000 aggregate value at any time during the year.
The crypto question: Is a Binance account (foreign exchange) a “foreign financial account”?
Current FinCEN guidance (2025): UNCLEAR.
FinCEN has NOT explicitly stated whether crypto on foreign exchanges requires FBAR reporting.
Arguments FOR reporting:
- Exchange holds assets on your behalf (custodial)
- Similar to foreign brokerage account
- Conservative compliance approach
Arguments AGAINST reporting:
- Crypto is property, not currency
- Not a “bank account” under traditional definition
- FinCEN Form 114 instructions don’t mention crypto
At LA Tech Week, the consensus among international tax attorneys:
REPORT IT ANYWAY (conservative approach).
Why? Penalties for non-reporting are draconian. Even if ultimately not required, over-reporting is safer than under-reporting.
FBAR Penalties: Why You Don’t Want to Gamble
Non-willful violation:
- Penalty: Up to $10,000 per year per account
- Applies if you didn’t know about requirement
Willful violation:
- Penalty: Greater of $100,000 or 50% of account balance PER YEAR
- Criminal prosecution possible
Real case:
Client: U.S. citizen with $500,000 in crypto on Binance (foreign exchange)
- Never filed FBAR (didn’t know requirement)
- IRS examination discovered Binance account
- IRS asserted FBAR required
- Non-willful penalty: $10,000/year × 5 years = $50,000
- Client paid $50,000 penalty (negotiated from potential $100,000+)
This is why we report conservatively.
Which Foreign Exchanges Trigger FBAR?
Exchanges clearly outside U.S.:
- Binance (Cayman Islands / Malta)
- Kraken (if using non-U.S. entity)
- Bitfinex (British Virgin Islands)
- OKX (Seychelles)
- Bybit (Dubai)
U.S.-based exchanges (NO FBAR required):
- Coinbase (U.S. company)
- Gemini (U.S. company)
- Kraken USA (U.S. subsidiary)
Grey area:
- Kraken International vs. Kraken USA (determine which entity)
- Circle (USDC issuer - is this a financial account?)
My recommendation: If exchange headquarters is outside U.S., report on FBAR.
The $10,000 Aggregate Threshold
FBAR required if aggregate foreign account balance exceeds $10,000 at ANY time during year.
Example:
Client accounts (highest balance during year):
- Binance: $8,000 (June 15)
- Bitfinex: $4,000 (September 22)
- Total aggregate: $12,000
FBAR REQUIRED (even though no single account exceeded $10,000)
Important: Use highest balance during year, not year-end balance.
Tracking challenge:
Client must track DAILY balances for all foreign accounts.
How to determine highest balance:
- Export transaction history from exchange
- Calculate daily balance
- Convert to USD at exchange rate on each day
- Identify maximum
This is tedious but required.
FATCA Form 8938: The Other International Reporting
FATCA = Foreign Account Tax Compliance Act
Form 8938: Statement of Specified Foreign Financial Assets
Filing threshold (single filer living in U.S.):
- $50,000 on last day of year, OR
- $75,000 at any time during year
Filing threshold (married filing jointly):
- $100,000 on last day of year, OR
- $150,000 at any time during year
Higher thresholds if living abroad.
The crypto question: Do foreign exchange crypto holdings count as “specified foreign financial assets”?
IRS Form 8938 instructions (2024-2025): Ambiguous on crypto.
At LA Tech Week, consensus:
YES, report foreign crypto holdings on Form 8938 if exceeding thresholds.
Conservative approach: Count crypto on foreign exchanges as foreign financial assets.
FBAR vs. Form 8938: What’s the Difference?
Both require reporting foreign accounts, but:
| Feature | FBAR (FinCEN 114) | Form 8938 |
|---|---|---|
| Filing agency | FinCEN (Treasury) | IRS |
| Threshold | $10,000 aggregate | $50K-$150K (varies) |
| Due date | April 15 (auto-extension to October 15) | April 15 (with tax return) |
| Penalties | Up to $100,000 or 50% | Up to $60,000 |
| Filed with | Separate (FinCEN website) | Attachment to Form 1040 |
Overlap: Many taxpayers must file BOTH.
Example:
Client with $80,000 on Binance:
- FBAR: YES (exceeds $10,000)
- Form 8938: YES (exceeds $50,000 for single filer)
- Must file both
Reporting on both forms is NOT double-reporting. They’re separate requirements.
How to Complete FBAR for Crypto
FinCEN Form 114 fields:
Part I: Filer Information
- Name, SSN, address (standard)
Part II: Foreign Financial Account
For each foreign exchange account:
1. Type of account:
- Select: “Other” (crypto not explicitly listed)
2. If “Other,” specify:
- “Cryptocurrency exchange account”
3. Maximum account value (in USD):
- $82,500 (highest balance during year)
4. Name of financial institution:
- Binance Holdings Limited
5. Address of financial institution:
- This is tricky - use registered address (Cayman Islands or Malta)
- Binance.com doesn’t have physical branch you visited
6. Account number:
- Your user ID or account number at exchange
7. Identifying information:
- Use exchange entity name and registration number (if available)
Example:
Type of Account: Other
Specify: Cryptocurrency exchange account
Maximum Value: $82,500
Institution Name: Binance Holdings Limited
Institution Address: PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands
Account Number: [Your Binance user ID]
Repeat for each foreign exchange.
How to Complete Form 8938 for Crypto
Form 8938: Statement of Specified Foreign Financial Assets
Part I: Foreign Deposit and Custodial Accounts
For each foreign crypto exchange:
1. Description:
- “Cryptocurrency held at Binance exchange”
2. Identifying number:
- Account/User ID
3. Complete Part IV:
- Asset description: “Bitcoin, Ethereum, and other cryptocurrencies”
- Value at end of year: $78,000
- Maximum value during year: $82,500
4. Name of institution:
- Binance Holdings Limited
5. Mailing address:
- [Same as FBAR]
Example:
Description: Cryptocurrency held at Binance exchange
Account ID: 12345678
Asset type: Deposit account at financial institution
Value 12/31/2025: $78,000
Maximum value during 2025: $82,500
Institution: Binance Holdings Limited
Address: PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands
Self-Custody Crypto: FBAR Required?
Critical question: If you hold crypto in private wallet (not on exchange), is FBAR required?
Example: Client has $500,000 in Bitcoin in Ledger hardware wallet (self-custody).
FBAR required?
My analysis:
NO - FBAR not required for self-custody.
Rationale:
- FBAR requires “foreign financial account”
- Self-custody wallet is NOT an account at a financial institution
- No intermediary holds assets
- You control private keys directly
However: This is not 100% certain (no official guidance).
Conservative approach: Some practitioners report self-custody on FBAR anyway.
My recommendation: Self-custody does NOT require FBAR, but document your position.
Form 8938: Also likely not required for self-custody (not a “financial account”).
Foreign Exchange Reporting: Form 1099-DA Confusion
Starting 2025, exchanges issue Form 1099-DA.
Question: Do foreign exchanges issue Form 1099-DA?
Answer: NO (initially).
IRS Form 1099-DA requirements apply to:
- U.S. brokers
- Foreign brokers with U.S. customers (in future)
2025-2026: Most foreign exchanges WON’T issue Form 1099-DA.
Problem: Client has Binance account, no Form 1099-DA received.
Does client still report income?
YES - absolutely.
Even without 1099-DA, all crypto income is taxable and must be reported.
Difference:
- U.S. exchange: IRS receives Form 1099-DA (knows your income)
- Foreign exchange: IRS doesn’t receive 1099-DA (relies on your reporting)
Non-reporting is tax evasion.
Offshore Voluntary Disclosure: What If Client Never Filed?
Scenario: Client has used Binance for 5 years, never filed FBAR or Form 8938.
What to do?
Option 1: Streamlined Filing Compliance Procedures
IRS program for taxpayers who:
- Non-willfully failed to report
- Want to come into compliance
- Avoid criminal prosecution
Requirements:
- File/amend last 3 years of tax returns
- File last 6 years of FBARs
- Pay back taxes + interest
- Certify non-willful conduct
Penalty:
- 5% penalty on highest aggregate account balance (last 6 years)
- No criminal prosecution
Example:
- Highest balance: $100,000 (2023)
- Penalty: $5,000
- Plus back taxes + interest
Much better than $100,000+ willful FBAR penalty.
Option 2: Delinquent FBAR Submission Procedures
If: No tax underreporting (just missed FBAR filing)
Process:
- File all missing FBARs
- Include explanation (reasonable cause)
- No penalties if reasonable cause accepted
Example: Client didn’t know about FBAR requirement, immediately files upon learning.
Option 3: Quiet Disclosure (NOT RECOMMENDED)
Some taxpayers: Just start filing FBAR going forward, hope IRS doesn’t notice past non-compliance.
Risk: IRS discovers non-compliance, asserts willful penalties.
I NEVER recommend this approach.
Foreign Crypto Exchange Tax Treaty Implications
Question: If exchange is in country with U.S. tax treaty, does that affect reporting?
Answer: NO - treaty doesn’t eliminate FBAR or Form 8938 requirements.
Tax treaties address:
- Double taxation
- Withholding rates
- Information exchange
Tax treaties do NOT eliminate:
- FBAR filing
- Form 8938 filing
- U.S. tax on worldwide income
Example: Crypto gains on Kraken International (if foreign entity) are:
- Reportable on FBAR
- Reportable on Form 8938
- Taxable in U.S. (worldwide income)
- May also be taxable in foreign country (depending on residency)
Beancount Tracking for FBAR Reporting
Challenge: Track daily balances on foreign exchanges.
My approach:
Monthly balance snapshots:
2025-01-31 balance Assets:Crypto:Binance:BTC 1.250 BTC
2025-01-31 balance Assets:Crypto:Binance:ETH 12.500 ETH
2025-01-31 balance Assets:Crypto:Binance:USDT 5000.000 USDT
2025-01-31 price BTC 67000.00 USD
2025-01-31 price ETH 3400.00 USD
2025-01-31 price USDT 1.00 USD
; Total Binance value: (1.25 × 67000) + (12.5 × 3400) + 5000 = $131,250
Track monthly, identify maximum:
Beancount query:
SELECT
account,
month,
sum(btc_value_usd + eth_value_usd + usdt_value_usd) AS total_usd
WHERE account ~ 'Binance'
GROUP BY account, month
ORDER BY total_usd DESC
LIMIT 1
Output: Maximum Binance balance = $131,250 (January 2025)
Report on FBAR: $131,250
Annual FBAR summary entry:
2025-12-31 * "FBAR Reporting Summary" #fbar-2025
foreign_account_1: "Binance"
account_1_max_balance: 131250.00
foreign_account_2: "Bitfinex"
account_2_max_balance: 15800.00
aggregate_max_balance: 147050.00
fbar_required: true
form_8938_required: true
filed_fbar: true
filed_form_8938: true
State Reporting Requirements
Some states have additional reporting:
California
- No separate FBAR requirement
- But asks on tax return: “Do you have foreign financial accounts?”
- Must answer YES
New York
- No separate reporting
- Federal FBAR/Form 8938 sufficient
Most states
- Follow federal rules
- No additional state-level FBAR
Questions for the Community
-
Are you reporting crypto on foreign exchanges on FBAR? Conservative (yes) or waiting for explicit guidance?
-
For self-custody crypto: Are you reporting on FBAR, or treating as exempt?
-
Have any clients used Streamlined Filing Compliance Procedures for missed FBAR? What was the process/outcome?
-
For Beancount users: How are you tracking daily/monthly balances for FBAR maximum value calculation?
-
Has anyone received IRS examination on FBAR non-compliance for crypto? What happened?
My Conservative Recommendations
For U.S. taxpayers with crypto on foreign exchanges:
- FILE FBAR if aggregate foreign crypto exceeds $10,000
- FILE FORM 8938 if exceeds applicable threshold ($50K-$150K)
- Report all income even without Form 1099-DA from foreign exchange
- Use Streamlined Procedures if past non-compliance (better than ignoring)
- Document position if taking non-reporting position (e.g., self-custody exempt)
The risk/reward:
- Risk of over-reporting: None (worst case, filed unnecessary form)
- Risk of under-reporting: $100,000+ penalties, criminal prosecution
File conservatively. Sleep well at night.
At LA Tech Week, EVERY international tax attorney said the same thing: “When in doubt with crypto, file FBAR and Form 8938. Penalties are too severe to gamble.”
Tina Chen, EA
Tax Specialist
P.S. - I’m creating “FBAR Crypto Compliance Checklist” and “Foreign Exchange Balance Tracker” (Beancount queries). If interest, will share with community.
Key Sources:
- LA Tech Week 2025 (October 13-19)
- FinCEN Form 114 (FBAR) Instructions
- IRS Form 8938 Instructions
- Streamlined Filing Compliance Procedures (IRS.gov)
- 31 U.S.C. § 5314 (FBAR statutory authority)
- 26 U.S.C. § 6038D (Form 8938 statutory authority)
Yes