Kraken is compelled to provide IRS its user data for tax compliance
July 1, 2023 11:28 PM
Kraken is mandated to share information on users who transacted more than $20,000 in a single year.
U.S. District Court Judge Lucy Koh of the Northern District of California has instructed Kraken, a cryptocurrency exchange, to provide the IRS with the user's account and transaction details. The government stated that it needed the information to establish whether any of the exchange's customers had underreported the amount they paid in taxes.
According to the order issued→ on Friday, June 30, Kraken must disclose the names (real or pseudonymous), dates of birth, taxpayer identification numbers, addresses, telephone numbers, email addresses, and various other documents of those who were involved in transactions surpassing $20,000 within a year.
Shortly after Kraken settled with the U.S. Security and Exchange Commission (SEC) in February over charges of securities law breaches connected to its staking service, the Internal Revenue Service (IRS) filed a petition in the Northern District of California. The IRS said that it filed a summons to Kraken in 2021, which the exchange did not comply with, and that it is now looking into the tax liabilities of consumers who transacted in cryptocurrency between 2016 and 2020.
Kraken will also be compelled to provide the blockchain addresses and transaction hashes that both of which are currently part of the publicly available transaction data. The IRS may also request raw data from the exchange.
The IRS's request for Kraken to reveal→ his or her place of employment and financial support appears to have been rejected by the presiding judge, Joseph Spero. The judge flatly denied several of the IRS's requests.
In his evaluation of specific IRS demands, the judge indicated that the court must determine whether the government's summons is sufficiently focused, which means that it shouldn't go past what is required to fulfill its declared objective.
The data requested in the first three inquiries, which try to determine Kraken account holders who fit the "Doe" criterion, is unduly wide, according to the court's opinions, and surpasses what most users require to confirm their identities.
The verdict on Friday sides with the federal government. It comes amid a broader crackdown on Bitcoin in the United States. In June, the SEC filed separate cases against Coinbase and Binance, claiming them of operating an illegal exchange. The United States mishandled client cash, deceived investors and authorities, and violated securities laws.