San Francisco-based cryptocurrency exchange Kraken finds itself in the middle of a legal showdown with the Internal Revenue Service (IRS) as it fights the agency’s request for user data. For its part, the IRS Seek To investigate potential tax liabilities of Kraken customers who engaged in cryptocurrency transactions between 2016 and 2020.
However, while the Northern District Court in California has ordered Kraken to disclose certain information, the exchange appears determined to protect the privacy of its customers and prevent potential harm. The cryptocurrency exchange argues that the IRS demands go beyond what is necessary and stresses the importance of consumer security and privacy.
Kraken resist calling the IRS
Kraken’s refusal to comply with the IRS subpoena led to a legal battle between the exchange and the tax agency. The IRS aims to identify users who may have underreported their taxes, focusing on individuals who transacted more than $20,000 in cryptocurrency during a single calendar year.
On the other hand, the exchange is concerned about the potential for its customers to suffer identity theft and other damages if their information is leaked by the IRS.
A Kraken spokesperson stated, “We fought the IRS because they sought intrusive and unnecessary information about US customers… If this information were leaked by the IRS, it would expose Kraken customers to identity theft and other damages, which Kraken has prevented.”
Court ruling and Kraken’s dedication to consumer protection
A US district court has issued an injunction requiring Kraken to provide account and transaction data to the IRS. However, the court denied some of the IRS’ broader requests, including requests for additional personal information such as employment details and sources of wealth.
In accordance with the order of Judge Joseph C. ”
Total market cap chart at $1.18 trillion | Source: Crypto Total Market Cap on Tradingview.com
Kraken appreciated the court’s dismissal of these demands, affirming its commitment to consumer security and privacy. The exchange undertakes to continue to defend its clients and protect them from unnecessary interference.
The IRS investigation into Kraken and its users aligns with a broader trend of increased scrutiny of the cryptocurrency industry by US regulatory agencies.
Similar actions have been taken by the US Securities and Exchange Commission (SEC) against other major exchanges such as Coinbase and Binance.US. Concerns about regulatory barriers and a perceived anti-crypto climate have prompted influential industry figures, such as Coinbase CEO Brian Armstrong, to consider moving their operations to more crypto-friendly jurisdictions such as Singapore, Hong Kong, and the United Kingdom.
Featured image from Financial Times, chart from Tradingview.com