Kraken Faces Court Order to Provide User Data to IRS for Tax Compliance

The United States District Court for the Northern District of California has issued an order requiring cryptocurrency exchange Kraken to provide user account and transaction information to the Internal Revenue Service (IRS). The IRS claims that it needs the data to determine if any Kraken users have failed to report their taxes accurately.

The court order, issued on June 30, mandates that Kraken disclose details of users who engaged in transactions exceeding $20,000 within a calendar year. This includes information such as names (real or pseudonyms), birthdates, taxpayer identification numbers, addresses, phone numbers, email addresses, and various other documents.

The IRS initiated legal action against Kraken in February after the exchange reached a settlement with the US Securities and Exchange Commission (SEC) over allegations of securities law violations related to its staking service. The IRS alleges that it had previously issued a summons to Kraken in 2021, which the exchange failed to comply with. The agency now seeks to investigate the tax obligations of users who conducted cryptocurrency transactions on the platform between 2016 and 2020.

In addition to user information, Kraken will be required to provide blockchain addresses and transaction hashes, which are already part of the available transaction data. The exchange may also be asked to provide raw data to the IRS.

Judge Joseph Spero, who presided over the case, dismissed some of the IRS’s requests, such as the demand for employment information and source of wealth from Kraken. The judge deemed these requests excessive and denied them.

The court’s decision in favor of the government’s request comes at a time when US regulators are intensifying their scrutiny of the cryptocurrency industry. In June, the SEC filed separate lawsuits against Coinbase, accusing it of operating an illegal exchange, and Binance.US, alleging mishandling of customer funds, misleading investors and regulators, and violations of securities rules.

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