The question of whether the IRS’s plan involving a Central Bank Digital Currency (CBDC) is headed to court is complex and tied to broader political, regulatory, and legal developments surrounding digital currencies in the United States. While there is no direct, widely publicized lawsuit specifically targeting an IRS CBDC plan at this moment, several factors suggest that legal challenges could arise or are already being prepared in related areas of digital currency regulation.
First, it is important to understand what a CBDC is and how the IRS might be involved. A CBDC is a digital form of a country’s official currency, issued and regulated by the central bank—in the U.S., this would be the Federal Reserve. The IRS’s role would primarily be in tax enforcement and compliance related to transactions involving such a digital currency. The IRS has been increasingly focused on cryptocurrency tax reporting and enforcement, as seen in recent updates to tax forms and reporting requirements for digital assets. For example, new IRS forms like the 1099-DA require reporting of crypto sales, reflecting the agency’s intent to closely monitor digital asset transactions.
However, the Federal Reserve’s ability to issue a CBDC has faced significant political resistance. In August 2025, the U.S. House of Representatives included a provision in the National Defense Authorization Act that effectively bars the Federal Reserve from issuing or testing a CBDC, except for stablecoins. This legislative move reflects growing skepticism and concern about privacy, control, and the implications of a government-issued digital currency. The Senate’s stance remains uncertain, but this political pushback indicates that any CBDC initiative is highly contentious.
Given this environment, if the IRS were to implement or enforce tax rules specifically tied to a CBDC, it could face legal challenges on several grounds:
– **Privacy and Surveillance Concerns:** Critics argue that a CBDC could enable unprecedented government surveillance of financial transactions. Lawsuits could be filed claiming violations of constitutional rights to privacy or due process if the IRS uses CBDC data in ways perceived as intrusive.
– **Legislative Authority:** Since Congress has moved to restrict the Fed’s CBDC activities, any IRS actions based on a CBDC might be challenged as exceeding statutory authority or conflicting with congressional intent.
– **Taxation and Reporting Rules:** The IRS’s expanding crypto tax enforcement has already led to disputes and legal scrutiny. If CBDC transactions are taxed or reported under new rules perceived as unfair or unclear, affected parties might seek judicial review.
Currently, the Treasury Department and IR
