Over 14,000 people will be linked to their accounts to check they have been declaring their cryptocurrency profits.
The US Internal Revenue Service has won a battle against Coinbase and has obtained a court order to force the cryptocurrency platform to hand over the records of over 14,000 users.
Almost a year after the original complaint was filed, Coinbase has been ordered by a federal court in California to give the tax service the records of all users who purchased, sold, or were given over $20,000 in cryptocurrency in a single year, between the years 2013 — 2015.
As originally reported by The Verge, the court requires Coinbase to give the IRS user names, dates of birth, address, taxpayer IDs and all associated account activity and transaction records.
Cryptocurrency may be booming with the price of Bitcoin reaching $10,198 at the time of writing, but this order highlights that cryptocurrency does not necessarily mean anonymity — especially when the taxman becomes interested in your affairs.
Coinbase, however, sees a sliver of a silver lining in the order. In a blog post, the company claims the result is a “partial victory,” as the first IRS demand was far wider in scope.
The original demand from the IRS required every user record in this time period. Coinbase estimates that over 480,000 users have been protected, a 97 percent reduction from the original request.
In addition, the information Coinbase must hand over is enough to link customers and accounts, but the quantity of data has been reduced.
Originally, the IRS wanted complete user profiles, know-your-customer due diligence, documents regarding third-party access, transaction logs, records of payments processed, correspondence between Coinbase and Coinbase users, account or invoice statements, records of payments, and exception records, according to a court filing.
The platform has argued that such disclosure is “unjustified and invasive,” while the IRS argues that only 800 to 900 US citizens disclosed financial gains related to Bitcoin in the years 2013, 2014, and 2015, despite millions being traded on platforms such as Coinbase every year.
“Coinbase started this process more than 12 months ago, and while today’s result is not the complete victory we hoped for, it does represent a substantial and unprecedented victory for the industry and the hundreds of thousands of customers that would have been unfairly targeted if it weren’t for our action,” the company says. “Although we are disappointed not to be able to entirely defeat the summons, we are proud to fight for our customers and in the result, we were able to achieve as a small company against a large government agency.”
Coinbase is currently reviewing the order and will notify impacted users in due course, which is less than one percent of the firm’s total customer base.
“We were proud to appear in court today, together with support from industry colleagues, to continue to fight against what we believe to be government overreach,” Coinbase added. “In the future, we hope to work with the IRS to establish a reasonable tax reporting method that makes sense for virtual currency service providers and consumers alike.”