On October 27, The Block reported that Kraken will hand over user data to the US Internal Revenue Service (IRS) in early November. The media refers to a letter received by a client of the exchange. However, it does not apply to all users of the exchange, but only to those whose transactions exceeded $20,000 between 2016 and 2020.
Why and what customer data will Kraken hand over to the IRS
In February of this year, the IRS asked for the court’s permission to obtain Kraken user data. According to the request, the watchdog made a similar demand back in 2021, but the exchange did not comply with it. Finally, on June 30, 2023, the court ordered the platform to furnish the IRS with information regarding accounts and transactions.
Following months of legal proceedings, Kraken managed to reduce the amount of customer data to be provided. The IRS had initially sought information on 59,331 users of the exchange. However, following the court's decision, the exchange is obligated to report on 42,017 customers.
Moreover, the judge agreed with Kraken's lawyers that the IRS’s original data requests went beyond the necessary limit. Thus, the court reduced the list of data that the exchange must hand over. The initial IRS demands included IP addresses, user profile change histories, and payment methods. Now, this information encompasses names, birth dates, taxpayer identification numbers, addresses, phone numbers, email addresses, and transaction histories spanning five years.
The IRS needs this data to check if any of Kraken users have evaded taxes. Specifically, the agency is interested in customers whose transactions exceeded $20,000 during the period from 2016 to 2020.
Authorities are getting into crypto in various countries to seize taxes
This is not the first case of the tax authorities delving into the cryptospace. In late August of this year, the IRS proposed new crypto tax rules for brokers and DEXs. In October, Coinbase sent a letter criticising this idea. Also, in July, the agency introduced taxes on crypto staking.
These practices take place not only in the United States. For instance, in August, we wrote about South Korean officials seizing crypto for taxes.
In general, with the maturation of cryptocurrencies and the broader crypto market, regulatory actions by authorities are increasing as well. Read more about it in our article, The crypto market geography 2023.
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