Cryptocurrency exchange Kraken has announced that it will be required to hand over sensitive data to the Internal Revenue Service (IRS) following a recent court case. The IRS had initially demanded various records and data related to Kraken’s U.S. clients, but the exchange had objected, citing its commitment to client privacy. After a lengthy legal battle, the court ultimately ordered Kraken to provide information and transaction histories for clients who had transactions exceeding $20,000 in any single year from 2016 to 2020. This marks one of the largest successful attempts by the U.S. government to obtain data on crypto investors.
This move by the IRS is part of a broader effort by tax authorities to access information related to cryptocurrency transactions. Coinbase and Circle have previously been subjected to similar summons, and Poloniex was also recently forced to comply with a comparable order. These actions, combined with the recent rules proposals from FinCEN, which aim to require more proactive data analysis and reporting of transaction history, raise concerns about the extent of data collection efforts by tax authorities and other government agencies.
The implications for the privacy of Bitcoin users, even those who choose not to use regulated or KYCed services, are significant. The growing scope of these data collection efforts could have far-reaching consequences. For affected clients, Kraken will be required to provide the IRS with names, dates of birth, tax identification numbers, addresses, contact information, and transaction histories for the specified years. The exchange expects to share this information with the IRS in early November 2023.
Kraken is advising affected clients to consult with their tax advisors to address any potential tax liability related to their cryptocurrency transactions during the specified years. This development highlights the ongoing challenges and complexities surrounding the intersection of cryptocurrency and taxation.
❗Follow us on Twitter to get all the latest crypto news as soon as they're out! 🚀