IRS Faces Scrutiny Over Crypto Seizure Practices
A recent audit by the U.S. Treasury Inspector General for Tax Administration revealed significant shortcomings in how the Internal Revenue Service (IRS) Criminal Investigation division handles digital asset seizures. The report, covering December 2023 through January 2025, found failures in documenting seized cryptocurrencies, including incomplete records of wallet addresses, seizure dates, and asset amounts.
Key Audit Findings
The watchdog identified several critical issues:
- Inconsistent compliance with seizure memorandum requirements
- No centralized system to track seized digital assets
- Lack of clear timelines for documentation updates
Recommended Reforms
To address these deficiencies, auditors proposed:
- Mandatory training on seizure protocols for all IRS-CI personnel
- Development of a comprehensive digital asset inventory system
- Clear deadlines for completing seizure documentation
Growing Importance of Crypto Seizures
As U.S. authorities increasingly encounter digital assets in criminal cases, proper seizure protocols have become essential. Notable cases include:
- 94,000 Bitcoin from the 2016 Bitfinex hack
- 50,000 Bitcoin from Silk Road operations
Path Forward
The IRS has agreed to implement the recommended changes. These improvements aim to bring greater transparency and efficiency to digital asset seizures while maintaining the integrity of criminal investigations.
