The popular cryptocurrency trading platform, Coinbase, recently lost a long ongoing court battle with the US Internal Revenue Service (IRS). The Californian federal court recently issued an order that the exchange platform allows the IRS access to the records of all users who have either traded, sent, or received an amount surpassing $20,000 via their Coinbase accounts between the period of 2013 and 2015. So far the affected users are estimated to be around 14,355.
Coinbase has been requested to provide the IRS with the relevant users’ details which include legal name, date of birth, tax number, as well as all information relevant to the user account’s transaction in the period between 2013 and 2015. The information will give the IRS a direct link between user accounts and their real-life identities as well as extensive financial records of every transaction conducted in the relevant period.
While still a blow for its user privacy, the final IRS order is much narrower than its initial request. The IRS initially requested that the exchange service provide the IRS with every single user’s account information and personal details. The initial request also included all communication between the exchange service and their users. However, the presiding judge found the initial request unnecessarily broad.
The order was issued as the IRS claimed that there was a large discrepancy between Bitcoin gains of the last few years and US citizens’ tax reports. While the government has not yet confirmed any wide-spread suspicions, the IRS claims that despite Coinbase’s user base of 6 million US users, less than 1000 citizens have reported their cryptocurrency holdings to the IRS. The discrepancy in numbers has led the IRS to suspect wide-spread tax avoidance amongst cryptocurrency users.
The latest order did not sit well in the international crypto community. According to Peter Van Valkenburg from Coin Center, the entire crypto community is unsatisfied both with the order as well as the IRS’ disregard for user privacy and its lack of justification for the order. Van Valkenburgh noted that considering the tax service’s lack of justification, it compromises cryptocurrency users’ privacy, as it demonstrates that the US courts are willing to support crackdowns on the crypto industry.
Ever since the IRS’ initial order, Coinbase has defended its user privacy with vigor. David Farmer from Coinbase previously stated that the trading platform would remain committed to fighting for its users’ privacy in the face of government interference. Farmer added that they hope to establish a reasonable working relationship with the IRS in the future which would protect its users while remaining compliant with tax policies.
Coinbase has not yet commented since the court order was issued.