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U.S. Court Orders Kraken to Provide User Transaction Details to IRS

Cryptocurrency Platform Faces IRS Probe for Tax Discrepancies

Sun, 02 Jul 2023, 11:40 am UTC

The spotlight is on cryptocurrency platform Kraken as a U.S. court has mandated it to submit user transaction details to the Internal Revenue Service (IRS). The decision, rolled out by the U.S. District Court for Northern California, stemmed from the IRS's plea for information to probe any tax discrepancies from the platform's users.

Dated June 30, the court decree expects Kraken to disclose information on users with transactions totaling over $20,000 annually. The demanded particulars include, but are not limited to, user identities (real or pseudonymous), birth dates, taxpayer IDs, addresses, and contact details. It also encompasses a broad range of paperwork associated with these transactions.

In the wake of a settlement between Kraken and the U.S. Securities and Exchange Commission (SEC) concerning allegations of securities law breaches, the IRS moved swiftly. They pursued a court petition in the same district to inquire into the tax liabilities of users who performed crypto transactions between 2016 and 2020. They claim that Kraken disregarded a summons they had issued in 2021.

Part of the verdict includes a directive for Kraken to reveal blockchain addresses and transaction hashes, already included in the transaction data up for sharing. The crypto exchange might also have to yield raw data to the IRS if asked.

Judge Joseph Spero, the case's presiding officer, appeared to dismiss the IRS's endeavor to procure employment details and the source of wealth from Kraken. Several requests from the IRS were flatly refused by the judge. He maintained that the court must ensure the government's summons is adequately targeted, not exceeding its intended scope.

In the judge's interpretation of certain IRS requisitions, he emphasized that their initial three requests to identify Kraken account holders, referred to as "Doe" definition, were overly expansive and surpassed what most users need to validate their identities.

The verdict, favoring the government, aligns with the intensifying U.S. clampdown on cryptocurrencies. Just recently, the SEC leveled separate accusations against Coinbase for running an illicit exchange and Binance.US for mishandling customer assets, misleading stakeholders and regulators, and violating securities regulations.

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