Cryptocurrency Held on Foreign Exchanges: FBAR and Form 8938 Risks

As crypto has grown, so has the question of whether it triggers FBAR and Form 8938 reporting obligations — and the answer is still evolving. FinCEN proposed rules in 2021 that would require FBAR reporting for virtual currency held on foreign exchanges, but as of 2024, those rules have not been finalized. The IRS has confirmed that crypto held in a foreign account that is otherwise FBAR-reportable (such as crypto in a foreign brokerage account also holding securities) must be reported. For Form 8938, the IRS similarly hasn't issued definitive guidance, but many tax professionals recommend reporting crypto on foreign exchanges when the value exceeds the thresholds, following a conservative approach. The general principle is: when there's regulatory uncertainty, reporting protects you far better than not reporting — the penalties for failing to report financial assets are severe, and "I wasn't sure if it counted" is not a strong defense.