IRS Division Failed to Meet Standards for Seizing Crypto, Says Watchdog

A recent evaluation by a US government watchdog has revealed shortcomings in the Internal Revenue Service (IRS) Criminal Investigation division's handling of digital assets. The report, released on Tuesday, states that the IRS failed to follow established protocols for seizing and holding cryptocurrency in cases, citing repeated failures to update seizure memorandums with accurate details.

The US Treasury Inspector General for Tax Administration conducted an evaluation between December 2023 and January 2025, focusing on the IRS Criminal Investigation division's procedures for seizing and safeguarding digital assets. The watchdog found that the IRS did not always adhere to guidelines around seizure memorandums, which include critical information such as addresses, dates, and amounts of seized cryptocurrency.

The Inspector General has recommended reforms to address these shortcomings, including ensuring that IRS-CI personnel are familiar with and follow established protocols for seizure memorandums. Additionally, the watchdog suggests establishing an inventory system to manage seized digital assets, accurately tracking quantities and treating all seized assets consistently.

These recommendations aim to improve the handling of digital assets by the IRS Criminal Investigation division. By implementing these changes, the agency can ensure that cryptocurrency seizures are handled more efficiently and in accordance with established guidelines.

The seizure and holding of digital assets have become increasingly relevant since efforts by the Trump administration to establish national Bitcoin (BTC) and crypto reserves. While some officials proposed stockpiling cryptocurrency from seized cases, others suggested alternative methods, such as using tariffs or revaluing gold certificates.

The US Government's Crypto Stockpile

Estimates on how much Bitcoin and other cryptocurrencies the US government holds vary based on available information from criminal cases. As of March, White House officials stated that there were approximately 200,000 BTC in the country's stockpile, valued at more than $21 billion.

The most significant seizures included over 94,000 BTC connected to the 2016 hack of crypto exchange Bitfinex and more than 50,000 BTC from the Silk Road marketplace. These seizures demonstrate the growing importance of cryptocurrency in modern law enforcement efforts.