In a recent court ruling, cryptocurrency exchange Kraken has been ordered to provide the Internal Revenue Service (IRS) with user account and transaction information. The IRS seeks this data to investigate potential tax underreporting by Kraken users. The court order mandates that Kraken disclose details of users who engaged in transactions exceeding $20,000 within a calendar year, including personal information such as names, birthdates, taxpayer identification numbers, addresses, phone numbers, email addresses, and other relevant documents.
The IRS had previously issued a summons to Kraken in 2021, which the exchange failed to comply with. This led to the court petition filed by the IRS in the Northern District of California. The investigation focuses on users who conducted cryptocurrency transactions between 2016 and 2020.
While Judge Joseph Spero presided over the case, he dismissed several of the IRS’ requests, including obtaining employment information and sources of wealth from Kraken. The judge emphasized the need for the government’s summons to be appropriately focused and not exceed what is necessary to achieve its intended purpose.
Kraken will also be required to release blockchain addresses and transaction hashes, which are already part of the available transaction data. Additionally, the exchange may be asked to provide raw data to the IRS, if necessary.
This ruling comes amidst an increasing crackdown on cryptocurrencies in the United States. Regulatory actions against major cryptocurrency exchanges, such as Coinbase and Binance.US, have recently taken place. The Securities and Exchange Commission has filed lawsuits alleging illegal operations and violations of securities rules.
As governments worldwide strive to regulate the cryptocurrency industry, the issue of taxation remains a significant concern. This court order highlights the IRS’s efforts to ensure tax compliance within the cryptocurrency space and underscores the potential implications for user privacy and data security.
It is important for individuals and businesses involved in cryptocurrency transactions to stay informed about evolving regulations and comply with tax requirements to avoid legal consequences.