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Coinbase Promises to Fight the IRS in Court Over Data on All Active US Bitcoin Traders

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by Tatsiana Yablonskaya · 3 min read
Coinbase Promises to Fight the IRS in Court Over Data on All Active US Bitcoin Traders

The Internal Revenue Services sent Coinbase a summons asking for information on all users basing on three isolated cases when people used bitcoin to evade taxes.

Coinbase, the largest bitcoin exchange in the U.S., has unveiled in the blog post that the U.S. government filed a civil petition in federal court intending to disclose all Coinbase U.S. customers’ records over a three year period. The petition is based on general statements that taxpayers may use virtual currency to evade taxes while there is no wrongdoing on the part of Coinbase.

“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”, Coinbase says.

Coinbase imparted that the Internal Revenue Services sent it a summons asking for information on all users.  According to the summons, an IRS agent has recently come across three cases when people used bitcoin to evade taxes. Two of three those cases concerned Coinbase customers. The IRS has also underlined that some Coinbase users are known to have not complied with federal law in the past.

These are only isolated incidents while the government may have gone too far in its intention to gain access to all of Coinbase’s users.

Chris Padovano, a lawyer and the founder of Decentralized Legal, commented: “There are two questions here. One is whether or not (the IRS has) reasonably identified a class of individuals and has a reasonable basis for believing that all U.S. customers for Coinbase from 2013-2015 may have failed to comply with laws based on these three users. Two is whether the information sought by IRS is not available from any other reasonable source than Coinbase.”

Padovano doesn’t officially represent Coinbase but he supposes that the bitcoin exchange will reject the request of the U.S. government.

“It’s very likely, considering their customer base and the philosophical base of most of their users, that Coinbase will challenge this summons,” Padovano told Reuters by telephone. “I think that they need to keep their base somewhat appeased.”

Coinbase responded to the IRS’s summons saying that the request has too wide-ranging nature.

“We want to work with law enforcement – that’s generally our policy,” Juan Suarez, the head legal counsel at Coinbase, said Friday. “But we can’t tolerate sweeping fishing expeditions. We are very concerned about the financial privacy rights of our customers.”

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