IRS wants Coinbase to provide identities of U.S. clients

Originally reported by tech magazine Motherboard, it was announced that the Internal Revenue Service (IRS) has requested identities of all U.S. customers from San Francisco-headquartered bitcoin exchange Coinbase. Coinbase is one of the most popular digital currency exchanges in the world, especially for US customers.

According to the original source, the IRS stated it wants identities from users who transacted on the site between 2013 and 2015. In a statement, a Coinbase spokesman said the exchange was “very concerned with the indiscriminate breadth of the government’s request.”

Tax Evasion Probing?

According to Motherboard, the IRS filing states, “there is a reasonable basis for believing that such group or class of persons may fail, or may have failed, to comply with one or more provisions of the internal revenue laws.”

The subjects identified in court documents are named only as “John Does.”

Coinbase is not one of the cryptocurrency exchanges regulated under New York State’s BitLicense but was one of the first to get state-by-state money transmitter licenses.

How bitcoin is taxed and classified is still a gray area, however, in 2014 the IRS ruled the cryptocurrency would be taxed as property, and affirmed standard reporting requirements for any payments made with it.

However, trading industry regulatory organizations in the U.S. such as the CFTC have declared that bitcoin be treated as a commodity. Back in September of 2015, the United States Commodities Futures Trading Commission (CFTC) settled charges against a small and now-defunct operation in San Francisco called Coinflip, which marketed bitcoin derivatives. In the process, the CFTC asserted for the first time that bitcoin is a “commodity”.

Coinbase issued the following direct statement today in response:

“Our customers may be aware that the U.S. government filed a civil petition yesterday in federal court seeking disclosure of all Coinbase U.S. customers’ records over a three year period. The government has not alleged any wrongdoing on the part of Coinbase and its petition is predicated on sweeping statements that taxpayers may use virtual currency to evade taxes.”

“Although Coinbase’s general practice is to cooperate with properly targeted law enforcement inquiries, we are extremely concerned with the indiscriminate breadth of the government’s request. Our customers’ privacy rights are important to us and our legal team is in the process of examining the government’s petition. In its current form, we will oppose the government’s petition in court. We will continue to keep our customers informed on developments in this matter.”

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