“Court Demands Kraken to Share User Data with IRS for Tax Compliance”

Kraken Ordered to Provide IRS with Account and Transaction Data

A federal court has mandated that the crypto exchange Kraken provide the Internal Revenue Service (IRS) with account and transaction data in order to determine if any of its customers have not reported their taxes accurately.

Pursuant to the order issued on Friday, June 30, Kraken must furnish information on users who have conducted transactions of more than $20,000 in a single year, including their real or assumed names, birthdates, taxpayer identification numbers, addresses, telephone numbers, email addresses, and other related documents.

In February, the Internal Revenue Service (IRS) filed a court petition in the Northern District of California shortly after Kraken settled with the United States Security Exchange Commission (SEC) regarding allegations of securities law violations concerning its staking service. The IRS asserted that a summons was issued to Kraken in 2021 which had not been adhered to, and now seeks to examine potential tax liabilities of users who engaged in crypto transactions between 2016 and 2020.

In addition, Kraken will need to make public blockchain addresses and transaction hashes, which are already included in the transaction information that is available to be shared. The IRS may also request the exchange to furnish them with raw data.

Judge Joseph Spero, who was in charge of the case, appears to have turned down the Internal Revenue Service’s endeavor to acquire employment data and origin of riches from Kraken. The judge refused several of the IRS’ demands without hesitation.

The judge declared that the Court must determine if the government’s summons is suitably concentrated, meaning it should not go beyond what is needed to achieve its desired outcome.

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The Court determined that the first three requests, which were intended to determine which Kraken account holders fit the description of Doe, were too far-reaching and went beyond what was necessary for most Doe users to prove their identities.

On Friday, a ruling in favor of the government was issued, as the US intensifies its clampdown on cryptocurrency. The Securities and Exchange Commission recently filed two distinct lawsuits, accusing Coinbase of operating an illicit exchange and accusing Binance.US of failing to manage customer funds properly, misleading investors and regulators, and violating securities regulations.

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