IRS division failed to meet standards for seizing crypto, says watchdog

A US government watchdog has recommended reforms to the Internal Revenue Service (IRS) criminal investigation division’s handling of digital assets, citing repeated failures to follow established protocols.

In a Tuesday report, the US Treasury Inspector General for Tax Administration said its evaluation of the IRS Criminal Investigation (IRS-CI) revealed shortcomings around the seizure and safeguarding of digital assets.

According to the government watchdog, the IRS failed to follow all guidelines between December 2023 and January 2025 for seizure memorandums around confiscated crypto, detailing the addresses, dates, and amounts. 

“The recommendations that IRS-CI agreed with include: ensuring that IRS-CI personnel are familiar with and adhere to seizure memorandum requirements; establishing an inventory system that can manage seized digital assets to include accurately tracking the quantity of digital assets and ensure the consistent treatment of all seized digital assets; and updating internal guidelines to include time frame requirements for preparing the seizure memorandum and updating records in its inventory tracking system,” said the report.

The seizure and holding of digital assets by US government authorities has become more relevant since efforts by the Trump administration to establish national Bitcoin (BTC) and crypto reserves.

Though White House officials initially proposed stockpiling crypto primarily from that seized in criminal cases, some have suggested alternatives through tariffs and revaluing gold certificates.

Related: US Supreme Court will not review IRS case involving Coinbase user data

How much crypto does the US government hold?

Estimates on how much Bitcoin and other cryptocurrencies the US government currently holds vary based on information available from criminal cases. As of March, White House officials said there were roughly 200,000 BTC in its stockpile, worth more than $21 billion at the time of publication.

The most significant seizures included more than 94,000 BTC connected to the 2016 hack of crypto exchange Bitfinex and more than 50,000 BTC from the Silk Road marketplace.

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