If you hold cryptocurrency on a foreign exchange and your total foreign accounts hit $10,000 or more at any point last year, you could be facing a FBAR violation-and penalties as high as $100,000. This isn’t theoretical. The IRS is already filing lawsuits over it. In January 2024, the first known case went to court: a U.S. taxpayer was hit with a $100,000 penalty for not reporting $12,000 in Bitcoin held on Binance’s international platform. If you thought crypto was off the radar, you’re wrong. The rules changed, and enforcement is here.
What Exactly Is an FBAR?
FBAR stands for Foreign Bank and Financial Accounts Report. It’s not a tax form. It’s a disclosure form-FinCEN Form 114-that you must file if you have a financial interest in or signature authority over foreign accounts totaling more than $10,000 at any time during the calendar year. That’s not per account. That’s the total across all your foreign accounts combined.It’s been around since 1970, but until recently, crypto wasn’t clearly included. Now, FinCEN officially proposed rules in June 2023 to treat cryptocurrency held on foreign exchanges as a financial account under FBAR rules. The final rule is expected in late 2024 or early 2025. But here’s the catch: the IRS says you were already required to report crypto under existing rules. They’re not waiting for the new rule to start enforcing.
Who Has to File?
If you’re a U.S. person-citizen, green card holder, resident alien, or even a U.S.-based corporation or trust-and you had more than $10,000 in combined foreign accounts during any day in 2024, you must file. This includes:- Foreign bank accounts
- Foreign brokerage accounts
- Foreign insurance policies with cash value
- Foreign cryptocurrency exchanges like Binance (non-US), Kraken EU, KuCoin, or Bybit
It doesn’t matter if you didn’t withdraw the crypto. It doesn’t matter if you didn’t sell. If you held it on a foreign platform and the value crossed $10,000-even for one hour-you triggered the requirement.
What Counts as a Foreign Crypto Account?
Not all crypto platforms are treated the same. The key is where the exchange is legally based-not where you live or where the server is. For example:- Foreign: Binance (registered in Malta), Kraken (EU entity), KuCoin (Seychelles), Bybit (Dubai)
- Not foreign: Coinbase, Kraken US, Gemini, Bitstamp US (U.S.-based entities)
Even if you used Binance US, but also had a separate account on Binance.com, that foreign account counts. The IRS doesn’t care if you think they’re the same company. Legally, they’re separate entities. And if your total across both was over $10,000, you had to report it.
Penalties: 0,000 Is Real
There are two types of penalties: non-willful and willful.Non-willful violations mean you didn’t know you had to file. The penalty is up to $16,536 per violation in 2025 (adjusted for inflation). That’s still serious-but not life-changing.
Willful violations mean the IRS believes you knew or should have known. This is where it gets dangerous. The penalty is the greater of:
- $100,000, or
- 50% of the highest balance in the account during the year
That’s not per account. That’s per year you didn’t file. If you had $200,000 in Kraken EU in 2021 and didn’t file, the IRS can hit you with $100,000 just for that year. If you didn’t file for three years? That’s $300,000 in penalties-plus interest.
The Supreme Court’s Bittner decision in 2023 changed how penalties are counted. Previously, some courts applied penalties per unreported account. Now, it’s per report. So if you had 10 foreign accounts and missed one FBAR filing, you pay one penalty-not ten. That’s good news. But it doesn’t reduce the $100,000 cap.
Why Is This Happening Now?
The IRS isn’t randomly targeting crypto users. They’ve been building a case for years.- Since 2022, major exchanges like Binance, Kraken, and Coinbase have started collecting U.S. taxpayer IDs (SSN or ITIN) for international accounts.
- FATCA and CRS now let the IRS get data from over 110 countries automatically.
- In 2023, the IRS collected $1.2 billion from international tax enforcement-$340 million of that came from FBAR penalties.
- By 2026, that number is projected to hit $890 million.
The IRS has a dedicated unit-Large Business and International (LB&I)-focused on crypto compliance. They’re using data from foreign exchanges, blockchain analytics, and cross-referenced tax returns to find missing FBARs.
What Happens If You Didn’t File?
Don’t panic. But don’t ignore it either.If you realize you should’ve filed but didn’t, you have options:
- File late with reasonable cause. If you can prove you didn’t know (e.g., you’re a new crypto user, didn’t get tax advice), you might avoid penalties. Many people have done this successfully with amended filings.
- Use the IRS Streamlined Filing Compliance Procedures. This is for non-willful failures. You file the last three years of FBARs, last three years of amended tax returns, and a statement explaining why you didn’t file before. Penalties are usually waived.
- Don’t wait for the IRS to find you. Once the IRS matches your name to a foreign exchange account, they’ll send a notice. At that point, you’re no longer eligible for streamlined relief. Penalties become automatic.
One user on Reddit, u/CompliantCryptoTrader, filed amended FBARs for 2020-2023 after learning about the rule. He included a detailed explanation and paid nothing. Another, u/OverseasCrypto, got hit with $100,000 for a $12,000 Kraken account because he waited too long.
How to Get It Right
Here’s what you need to do:- Identify all foreign crypto accounts. List every exchange where you held crypto in 2024. Check your login history. Even if you closed the account, it counts if you held over $10k at any time.
- Calculate the highest value. Use reliable exchange rates (CoinGecko, CoinMarketCap, or your exchange’s historical data). Track the peak value during the year-not the average. If your BTC hit $72,000 on March 15, that’s the value you use.
- Add up all foreign accounts. Crypto + bank + brokerage = total. If it’s over $10k, you need to file.
- File electronically. Go to FinCEN’s BSA E-Filing System. No paper forms. No exceptions.
- Keep records. Save screenshots of your balances, transaction histories, and exchange location info. The IRS may ask for proof.
Tools like CoinLedger, Bitwave, and Koinly can automate this. They pull your transaction history, convert values to USD, and generate FBAR-ready reports. Most cost $99-$299/year. That’s cheaper than one penalty.
What If You’re Not Sure?
If you’re unsure whether your exchange is foreign or whether your holdings triggered the $10k threshold, get help. Don’t guess. A crypto-savvy CPA or tax attorney can review your situation in 1-2 hours. Hourly rates range from $350-$600, but that’s a small price compared to a $100,000 penalty.Most people who get caught didn’t know. But ignorance isn’t a defense. The IRS doesn’t care if you didn’t read the rule. They care that you held the assets. And they have the data to prove it.