Crypto exchange Kraken is in a fierce dispute with the IRS
Kraken, a well-known cryptocurrency exchange, has been embroiled in a bitter dispute with the Internal Revenue Service (IRS) over the agency’s insatiable appetite for information about Kraken users. The exchange condemned the IRS’s relentless pursuit of data as a brazen and “unjustified treasure hunt.”
Despite repeated attempts to reduce the scope of the IRS investigation, Kraken has faced an obstacle and is now seeking asylum in a federal court in San Francisco. The exchange hopes that the court will issue an order requiring the IRS to stop its aggressive campaign. In the meantime, the IRS justifies its claims by citing an investigation into users who may be evading taxes.
Kraken considers IRS requirements excessive and a violation of the rules
The IRS has filed a motion to enforce the subpoena, stating that it intends to identify Kraken accounts that have had at least $20,000 worth of cryptocurrency transactions in a single year between 2016 and 2020. However, Kraken argues that the IRS has gone too far, exceeding the limits set by U.S. District Judge Jacqueline Scott Corley in a similar dispute with Coinbase about six years ago.
Kraken argues that the IRS has disregarded the same basic rules established in the Coinbase case by expanding its requirements even further and under a false pretext. Despite the fact that the IRS narrowed its initial demands in the Coinbase case, the company still refused to comply. Judge Corley ruled that subpoenaing more than 14,000 Coinbase users was not overly intrusive, as the IRS has a legitimate interest in scrutinizing taxpayers who may have failed to report their bitcoin trading profits.
Kraken lawyers emphasize differences with Coinbase case
Kraken’s legal team argues that the IRS’s demands are excessive and apply to a much larger group of users. The IRS’s request far exceeds the scope of what was requested in the Coinbase case, and Kraken’s lawyers emphasized this fact in their statement.
Given that Kraken is a leading cryptocurrency exchange with a daily global trading volume of approximately $650 million, its resistance to excessive tax seizures is attracting considerable attention. Nevertheless, it remains to be seen how this protracted legal battle will end.