Holders of cryptocurrencies have begun receiving letters from the IRS about possible tax violations, according to a WSJ report. The agency has sent the letters out to 10,000 people, the report states. “Taxpayers should take these letters very seriously. The IRS is expanding efforts involving virtual currency, including increased use of data analytics,” IRS Commissioner Chuck Rettig told the Journal. Unlike cash, it is possible to trace and, in some cases, identify holders of cryptocurrencies through their blockchain addresses. The IRS had sent out similar letters back in 2014.

For all the mainstream traction and media attention for cryptocurrencies in recent years, their regulatory status is still unclear. This has led some investors in the asset class to under- or misreport their holdings, evading tax authorities. The IRS treats cryptocurrencies as real estate and a sale of coins and tokens incurs capital gains tax. Trading and making payments using crypto is also taxable. Earning cryptocurrencies as income can also make one liable to taxes. Coinbase had shared data regarding trading on its accounts for 13,000 users in March 2018. Some commentators state that the batch of IRS letters may be related to that development.