Cryptocurrency exchange Coinbase lost a bid to block the Internal Revenue Service from seeing the trading records of its customers as part of a tax-avoidance probe, TechCrunch reports.
A San Francisco federal judge on Wednesday ruled that Coinbase must supply the IRS with identifying information on users who had more than US$20,000 in annual transactions on its platform between 2013 and 2015.
The ruling comes after bitcoin made historic valuation gains on a near-daily basis. The price of bitcoin has been soaring and crossed US$10,000 Tuesday. But it fell more than US$1,000 in a span of about 10 minutes on Wednesday, just hours after the cryptocurrency set an all-time high above US$11,000.
As of 2:19 p.m. on Nov. 30 Hong Kong Time, bitcoin rebounded to US$10,131, up 3.2 percent in the last 24 hours.
As TechCrunch reports, IRS asked Coinbase to hand over a broad swath of information on its users after noticing that the number of tax returns claiming gains from virtual currency didn’t line up with the emerging popularity of digital currencies as an investment vehicle.
San Francisco, California-based Coinbase, one of the world’s largest virtual currency exchanges, had resisted turning over the information since last November.
Negotiations between the company and the agency resulted in a narrowed request for information on all Coinbase users who made transactions from 2013 to 2015 to a smaller subset of high-value users.
“Coinbase itself admits that the Narrowed Summons requests information regarding 8.9 million Coinbase transactions and 14,355 Coinbase account holders. That only 800 to 900 taxpayers reported gains related to bitcoin in each of the relevant years and that more than 14,000 Coinbase users have either bought, sold, sent or received at least US$20,000 worth of bitcoin in a given year suggests that many Coinbase users may not be reporting their bitcoin gains,” the court documents read.
US citizens are supposed to pay capital gains tax on cryptocurrency transactions and the IRS labels virtual currencies as property for federal tax purposes.
“The government has sensed a windfall – any company that has a plethora of wealthy users might be in the sights,” Charles Hayter, chief executive of market tracker CryptoCompare, said in an email to Bloomberg. “If there is tax to be paid, the government is going to go after it if it makes an example.”
The court also narrowed the scope of documents that the IRS can request from Coinbase to taxpayer identification number, name, date of birth, address, transaction logs and account statements.
These personal data requests will only apply to accounts with the equivalent of US$20,000 in any one transaction type between 2013 and 2015. TechCrunch notes that the judge said other data need not be disclosed at this time, including public keys for all accounts, wallets and vaults.
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