Offshore Cryptocurrency 2026: Informational Tax & Reporting Guide

Offshore Cryptocurrency 2026: An Informational Guide

The body of law involving cryptocurrency continues to grow and expand. One complex area of cryptocurrency is the taxation of crypto and, more specifically, how foreign and offshore cryptocurrencies are handled for U.S. tax and IRS foreign information reporting purposes. With foreign cryptocurrencies, it can become very complicated because, technically, cryptocurrency is not a currency per se. The tax treatment of foreign crypto will vary greatly depending on which country the foreign cryptocurrencies are held in and where the income is generated. Since the United States taxes individuals on their worldwide income, in general, cryptocurrency and foreign cryptocurrency are taxable by the U.S. government — even if they are not taxable in the foreign country where they are held. Likewise, whether or not foreign crypto is reportable for international information reporting purposes will vary depending on how the crypto was held and the type of investment. Let’s take a brief introductory look at offshore cryptocurrency for 2026.

Is Foreign Cryptocurrency Taxable in the U.S.?

Yes. The reason why foreign cryptocurrency is taxable in the United States is because of how the United States tax system operates. Unlike most other foreign countries, the United States taxes individuals who are considered U.S. persons for tax purposes on their worldwide income.  Therefore, if a person is considered to be a US person for tax purposes, then all of their income is taxable, including income generated from foreign crypto. To be considered a US person for tax purposes, an individual will typically fall into one of three categories:

• • • U.S. Citizen

    • Lawful Permanent Resident

    • A Foreign National who meets the Substantial Presence Test

* Some individuals may qualify for a treaty election or other exception, exclusion, or limitation, but from a baseline perspective, individuals with foreign crypto are taxed on their foreign cryptocurrency income.

Foreign Investment Income

When a U.S. person generates income from their foreign cryptocurrency, typically, they will be taxed similarly to how they would be taxed on their US counterpart crypto income. For example, if a taxpayer sells foreign cryptocurrency, then they will typically pay long-term or short-term capital gains in the United States. Likewise, if the taxpayer is invested in a foreign crypto ETF or mutual fund, then they will pay tax on the dividends, capital gains, and dividend income.

In other words, any type of income that is related to crypto and would be taxable if it were held within the United States is going to be taxable as well, even if it is held overseas, such as airdrops, mining, etc.

Foreign Tax Credits

If a U.S. person for tax purposes generates foreign crypto income and they have already paid foreign taxes on that income in another jurisdiction, they may qualify for a foreign tax credit in the United States. Therefore, while the income is taxable, the crypto investor may not have any net effective tax liability if they have sufficient foreign tax credits to offset any U.S. taxes on their foreign crypto income.

Foreign Crypto Reporting

Where it starts to get very complicated is having to report the foreign cryptocurrency for U.S. tax and reporting purposes. There are many different types of crypto investments a person can make, and there are various types of foreign information reporting forms that taxpayers are required to file in order to disclose their offshore accounts, assets, and investments on U.S. tax returns.

Here are some of the basics:

FBAR (FinCEN Form 114)

If a person owns a crypto-based foreign account (with not other assets within the account aside from crypto), the current rule is that the taxpayer does not have to report this on the FBAR. But, for example, if the taxpayer has their crypto in a hybrid account, which may include crypto and other types of currencies such as USD, EUR, GBP, etc., then the value of the hybrid crypto account is reportable for FBAR:

IRS Publication 5569:

• • • “Example: A foreign account holding virtual currency is not reportable on the FBAR (unless it’s a reportable account under 31 C.F.R. 1010.350 because it holds reportable assets besides virtual currency). These funds aren’t reportable at this time, per FBAR regulations issued by FinCEN February 24, 2011, but FinCEN Notice 2020-2 indicates FinCEN’s intention to propose amending the regulations to include virtual currency as a type of reportable account under 31 CFR 1010.350.”

Form 8938 (FATCA)

Form 8938 requires the reporting of a greater category of assets than the FBAR. The general proposition amongst most tax professionals is that the foreign cryptocurrency would be reportable on Form 8938, because Form 8938 requires the reporting of foreign assets, and cryptocurrency is considered a foreign asset.

Form 8621 (PFIC)

PFIC refers to Passive Foreign Investment Companies. Many different types of structures may qualify for PFIC, but when it comes to cryptocurrency, the main reason the taxpayer would have to file Form 8621 is that they have invested in a foreign mutual fund or ETF comprised of cryptocurrency. Foreign crypto ETFs and mutual funds would be considered PFICs unless an exception, exclusion, or limitation applies.

Other International Reporting Forms

Depending on what type of foreign structure the taxpayer maintains, such as a foreign partnership, foreign corporation, or foreign trust, involving cryptocurrency may impact the taxpayer’s requirement to have to file these additional, more complicated international information reporting forms as well.

Is the Taxpayer Out of Foreign Reporting Compliance?

For Taxpayers who did not timely file their FBAR and/or other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs. Prior Year Non-Compliance

Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.