The Internal Revenue Service (IRS) is the American agency in charge of collecting taxes. One year ago, the IRS has decided to investigate whether it was leaving uncollected taxes or not. Coinbase, one of the most important cryptocurrency exchanges, was the targeted company. The intention was to identify the users that didn’t communicate any losses or gains.
IRS vs Coinbase
Coinbase is one of the most used cryptocurrency trading platforms in the world. In the United States it has started a legal fight against the IRS in order to protect customers’ privacy. The IRS has detected a ‘reporting gap’ between the 500,000 users registered in Coinbase and the 900 cryptocurrency owners reporting losses or gains between 2013 and 2015.
This gap means that the IRS is not collecting a lot of money that would be needed for other things. That situation can be taken for other cryptocurrency exchanges and apply different rules to their users. If another platform has a similar situation, it will immediately start to warn users about the risks that this involves.
“It’s legitimate for them to investigate whether people are making money on their bitcoin purchases. I have to give tremendous discretion to the agency as to how they investigate,” told Jacqueline Scott Corley, U.S. Magistrate Judge.
Coinbase Partial Victory
As of today, Coinbase has registered a legal victory over the IRS. During the last year, the IRS has requested information to Coinbase for these users without any financial report. Coinbase, in order to secure its customer’s privacy, could reduce the number of users investigated. The IRS wanted complete information about 500,000 users, it just obtained 14,000.
“Thanks to Coinbase’s efforts, more than 480,000 customers’ records were preserved from disclosure. This is a 97% reduction in the number of customers impacted by this summons,” reads the Coinbase’s statement.
Furthermore, Coinbase could achieve more. It has reduced the amount of information requested by the IRS.
“The quantity of data we must produce for the approximately 14,000 customers who remain in scope has been significantly reduced. In narrowing the scope of summons, we are pleased that the Court acknowledged the privacy rights at stake in this matter,” keeps the statement wrote by David Farmer, Director of Communication at Coinbase.
Before the company will give the information requested to the IRS, it will inform its users about the situation. Some time ago, CoinStaker reported how 100,000 new users registered in the platform in less than 24 hours. On November the 3rd, Bitcoin was reaching $7000 dollars. Now it has arrived at new all time highs $10,000.