Kraken Forced to Hand Customer Data to IRS

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  • Kraken will provide specific user information to the IRS next month, complying with a court order issued in June
  • Users who engaged in transactions exceeding $20,000 between 2016 and 2020 will have their data shared
  • The IRS-Kraken legal battle, which began in May 2021, has resulted in reduced data-sharing requirements but around 42,017 Kraken users will still be affected

Crypto exchange Kraken is slated to provide specific user information to the Internal Revenue Service (IRS) next month, finally bowing to a court order issued in June. Kraken users in the United States were informed of this development by email, where the exchange expressed its intention to comply with the court order and share the requisite data. Customers who engaged in transactions exceeding $20,000 in any single year between 2016 and 2020 will have their information passed to the IRS, which will tally their findings with tax returns filed by those individuals, news that will leave many whales on edge.

Case Dates Back to 2021

The IRS-Kraken legal battle originated in May 2021 when a U.S. federal court granted the tax agency the authority to issue a John Doe summons to Kraken and its subsidiaries, aiming to identify tax evaders. The IRS asserted that Kraken had failed to cooperate with the summons, and in February of this year the agency filed a court document seeking approval to enforce the summons. Finally, in June, a federal court ruled in favor of the IRS, compelling Kraken to provide user information.

According to the June court order, Kraken is obligated to furnish profile information and transaction records for clients who engaged in transactions exceeding $20,000 in any single year between 2016 and 2020. The information encompasses personal details such as names, birthdates, taxpayer identification numbers, addresses, phone numbers, email addresses, and transaction histories for the specified five-year period.

Kraken Reduced Investigation Scope

The IRS had originally sought more extensive data, including users’ IP addresses, employment information, sources of wealth, net worth, and banking particulars. However, Kraken conveyed in the email that it succeeded in persuading the court to significantly reduce the number of affected clients and the volume of client data it must provide.

The reduced number of affected clients appears to be 42,017, as per the June court order, in contrast to the IRS’s initial request for information on 59,331 Kraken users.

Kraken is not the sole cryptocurrency firm complying with IRS requests for user information; in 2018, its competitor Coinbase shared data on approximately 13,000 users with the federal tax agency, and in 2019 a US court ruled that the IRS could demand data on Bitstamp users.