Tax time: Largest Bitcoin exchange in US ordered to release private user data

Bitcoin exchange
Coinbase has fought aggressively against the request primarily because of its broad and indiscriminate scope

30Coinbase, the largest Bitcoin exchange and digital wallet provider have been instructed to hand over transaction records as part of an investigation into possible tax fraud by users

In an unprecedented move on the Bitcoin community, the bitcoin exchange Coinbase has been ordered by a federal court in California to turn over three years worth of their US customer records. In a two-page court order, US Magistrate Judge Jacqueline Scott Corley authorized the IRS to summon Coinbase to hand over the personal data of all users who conducted a transaction between 2013 and 2015. The so-called “John Doe” summons allows the IRS to obtain information about a group of taxpayers, even when the agency does not know their identities.

The request was triggered after the Internal Revenue Service (IRS) found instances of tax evasion involving Coinbase customers.  “The taxpayers being investigated have not been or may not be complying with U.S. internal revenue laws requiring the reporting of taxable income from virtual-currency transactions,” the IRS wrote in its request.

In response, the Bitcoin exchange has fought aggressively against the request primarily because of its broad and indiscriminate scope.

“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” the company said in a statement. “Our customers’ privacy rights are important to us and our legal team is in the process of examining the government’s petition.”

Although transactions are visible on Bitcoin’s public ledger, Coinbase has sole access to wallet owner’s identities. Without Coinbase providing the identities of their users, there is no other way for the IRS to get the information.

Members of the global Bitcoin community have sharply criticized the developments that could see thousands of law-abiding traders investigated for fraud.

More Here [theverge] [cnet]


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