Cryptocurrency compliance is going global. But is the US ready to tackle compliance with foreign exchanges and accountholders before it finishes developing reporting rules for US-based firms?

Even before the dust settles on the cryptocurrency and digital assets tax compliance guidelines included in last year’s Infrastructure Investment and Jobs Act, the Biden Administration wants to take its crypto compliance efforts international.

Under the infrastructure law, US-based exchanges likely will be classified as brokers and required to report on Form s their US customers’ gains and losses. But those specific rules wouldn’t apply to an overseas exchange. For a digital ecosystem designed to work seamlessly across international borders, that would leave a huge tax reporting gap that could grow with time. The administration’s budget request would use a two-pronged approach built on the Foreign Account Tax Compliance Act FATCA to try and close that gap.

FATCA generally requires overseas financial institutions to register with the IRS and report information on US account holders. But some jurisdictions bar financial firms from sending data directly to the IRS. In those cases, the US signs information sharing agreements that allow governments, rather than financial institutions, to share tax and financial data on the other country’s respective citizens.

The Biden budget would utilize the same approach for crypto transactions. US-based crypto exchanges would report to the IRS information on foreign account holders. The IRS would then share that information with foreign governments that provide reciprocal information about US investors using exchanges based in their jurisdictions.

The second part of the Biden administration’s approach would impose new reporting responsibilities on some individual taxpayers. Under FATCA, individuals with $, or more in an overseas account must report those assets to the IRS when they file their tax return. Failure to do so can result in a fine of up to $, per offense. Biden’s budget would require the same disclosure for US taxpayers’ digital assets maintained by foreign exchanges or other foreign service providers.

Biden isn’t the only one looking to address the cross-border crypto reporting issue. Earlier this month the OECD circulated a discussion draft for a “Crypto-Asset Reporting Framework.” It includes rules and guidelines for member nations as well as a framework for bilateral or multilateral agreements to allow for the automatic exchange of crypto data among countries.

On paper, these efforts should complement Biden’s domestic efforts to track capital gains and losses from cryptocurrency and digital asset trades. But they will have detractors. Republicans have long sought to repeal FATCA and the law is a source of consternation for overseas Americans, banks, and tax practitioners.

There is also the question of timing. Individuals are just getting used to disclosing their crypto dealings on their tax returns. The way the Biden budget proposal is written, those who happen to use a foreign-based exchange would be subject to FATCA a full year before users of domestic exchanges can expect to start seeing s. Are those filers ready to face five-figure fines for failure to comply during next year’s filing season? Would they even know they’re using a foreign-based exchange that requires an entirely different tax form?

Tax reporting of digital assets and cryptocurrencies is a global issue, so the Biden Administration and the OECD are doing the right thing by being proactive. But imposing strict FATCA compliance rules on individuals before other compliance features are up and running could prove problematic. Ideally, nations should develop a well-functioning information reporting system among brokers in the crypto space before subjecting a specific set of individual taxpayers to significant fines.