American Tax Office (IRS) Goes After American Cryptocurrency Traders at Coinbase

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Motherboard is reporting that the US Internal Revenue Service is seeking the personal data of all U.S. Coinbase users who transacted between 2013 and 2015 that a Coinbase spokesman said the exchange site was “very concerned with the indiscriminate breadth of the government’s request.” 

Coinbase, which is headquartered in San Francisco, California, is a company which facilitates transactions of digital currencies like bitcoin and Ethereum.

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Two and a half weeks ago, the Department of Justice (DOJ) filed paperwork in federal court (California Northern District Court, Case No. 3:16-cv-06658-JSC) requesting John Does, United States persons who, at any time during the period January 1, 2013, through December 31, 2015, conducted transactions in a convertible virtual currency as defined in IRS Notice 2014-21. 

Here, based on the IRS’s experience, U.S. taxpayers have made use of virtual currencies to evade the reporting and payment of taxes. See Utzke Decl. at 30, 34. As described above, Senior Revenue Agent Utzke is aware of three instances of U.S. taxpayers using virtual currency transactions to conceal income, two involve Coinbase. 

The summons comes shortly after the Treasury Department’s inspector general issued a report chastising the tax agency for not taking more aggressive action to curb “unlawful activities by those who use virtual currencies.”

“None of the I.R.S. operating divisions have developed any type of compliance initiatives or guidelines for conducting examinations or investigations specific to tax noncompliance related to virtual currencies,” the report, delivered in September, said.

Coinbase is one of the largest exchangers globally of bitcoin into U.S. dollars and the largest exchanger in the U.S. of bitcoin into U.S. dollars and Coinbase claims that it has 4.8 million users trading over $5 billion in virtual currencies making it “the world’s most popular way to buy and sell bitcoin and Ethereum.

Coinbase stated on their website:

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.

The IRS is asking Coinbase to turn over records for users who show:

“…any U.S. address, U.S. telephone number, U.S. e-mail domain, or U.S. bank account.”

Requested records include but are not limited to user profiles, user preferences, user security settings and history, user payment methods, and other information related to the funding sources for the account/wallet/vault. And that’s just for starters. IRS is also seeking all records of account/wallet/vault activity including but not limited to records identifying the date, amount, and type of transaction, names or other identifiers of parties to the transaction; requests or instructions to send or receive bitcoin; and all correspondence.

 

 

About Richard Kastelein

Founder and publisher of industry publication Blockchain News (EST 2015), a partner at ICO services collective Token.Agency ($750m+ and 90+ ICOs and STOs), director of education company Blockchain Partners (Oracle Partner) – Vancouver native Richard Kastelein is an award-winning publisher, innovation executive and entrepreneur. He sits on the advisory boards of some two dozen Blockchain startups and has written over 1500 articles on Blockchain technology and startups at Blockchain News and has also published pioneering articles on ICOs in Harvard Business Review and Venturebeat. Irish Tech News put him in the top 10 Token Architects in Europe.

Kastelein has an Ad Honorem - Honorary Ph.D. and is Chair Professor of Blockchain at China's first Blockchain University in Nanchang at the Jiangxi Ahead Institute of Software and Technology. In 2018 he was invited to and attended University of Oxford's Saïd Business School for Business Automation 4.0 programme.  Over a half a decade experience judging and rewarding some 1000+ innovation projects as an EU expert for the European Commission's SME Instrument programme as a startup assessor and as a startup judge for the UK government's Innovate UK division.

Kastelein has spoken (keynotes & panels) on Blockchain technology in Amsterdam, Antwerp, Barcelona, Beijing, Brussels, Bucharest, Dubai, Eindhoven, Gdansk, Groningen, the Hague, Helsinki, London (5x), Manchester, Minsk, Nairobi, Nanchang, Prague, San Mateo, San Francisco, Santa Clara (2x), Shanghai, Singapore (3x), Tel Aviv, Utrecht, Venice, Visakhapatnam, Zwolle and Zurich.

He is a Canadian (Dutch/Irish/English/Métis) whose writing career has ranged from the Canadian Native Press (Arctic) to the Caribbean & Europe. He's written occasionally for Harvard Business Review, Wired, Venturebeat, The Guardian and Virgin.com, and his work and ideas have been translated into Dutch, Greek, Polish, German and French. A journalist by trade, an entrepreneur and adventurer at heart, Kastelein's professional career has ranged from political publishing to TV technology, boatbuilding to judging startups, skippering yachts to marketing and more as he's travelled for nearly 30 years as a Canadian expatriate living around the world. In his 20s, he sailed around the world on small yachts and wrote a series of travel articles called, 'The Hitchhiker's Guide to the Seas' travelling by hitching rides on yachts (1989) in major travel and yachting publications. He currently lives in Groningen, Netherlands where he's raising three teenage daughters with his wife and sailing partner, Wieke Beenen.

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