Recent news in the cryptocurrency industry is that one of the top coin exchanges Coinbase has been ordered to turn over details of high-value clients to the US government. Although this information had previously been requested by the Internal Revenue Service (IRS) last November, California-based Coinbase had been resisting providing it.
New ruling means Coinbase have to comply
In a bid to prevent the IRS from seeing trading records of its users, Coinbase had sought a legal ruling which would allow them to refuse the request. However, a judge in San Francisco ruled in the favour of the IRS, which means they are now legally required to pass on the relevant information regarding its users.
The court ruled that Coinbase must give the IRS details of any of its users that had more than $20,000 in yearly trades on the platform from 2013 to 2015. Although this is a narrowed down version of what was originally sought by the IRS, it still represents around 14,000 Coinbase clients.
Why does the IRS need this information?
The reason behind this probe from the IRS revolves around the feeling that some Coinbase users may not have paid the relevant capital gains taxes they should have on their transactions. With the number of people potentially involved and the amount of tax due, the IRS are very keen to investigate further. By obtaining these user details from Coinbase, the IRS hope to identify any individuals who have not paid all the relevant tax they should have during the period in question.
Many feel that the massive gains made by Bitcoin this year have alerted the IRS to the possibility that traders on Coinbase may not be declaring all their income for tax purposes.
Request is only for high-value users
It should be noted that this request from the IRS only applies to certain high-end Coinbase users and not literally everyone who holds an account there. The ruling judge also made it clear that Coinbase would only have to provide certain documents to comply, including taxpayer identification number, name, date of birth, address and transaction logs.