The U.S. tax authority, the Internal Revenue Service (IRS), has won its legal battle to require crypto exchange Kraken to provide detailed information on all accounts that have traded more than $20,000 in cryptocurrencies between the years 2016-2020. The ruling, issued by Magistrate Judge Joseph Spero of the United States District Court for the Northern District of California on the 30th of June, marks the latest step in the U.S. government’s ever-increasing crackdown on cryptocurrency as it seeks to close loopholes historically exploited by crypto traders, hedge fund managers, and other monetary criminals.
IRS Intensifies Efforts to Combat Tax Evasion in the Crypto Industry
Friday’s court order requires Kraken to provide a range of user information, including names, birthdates, addresses, and more. Judge Spero dismissed the IRS’s requests for employment information and source of wealth from Kraken, deeming them overly broad.
Kraken, which recently settled with the SEC, is now obligated to comply with the IRS as well. Besides Kraken, several other crypto projects and exchanges have come under fire from regulatory authorities including Coinbase and BinanceUS. Both were separately accused by the SEC in June of violations including running illegal exchanges and misleading investors.
As the IRS intensifies its efforts to combat tax evasion, the crypto industry faces mounting government scrutiny and stricter regulations. President Joe Biden’s address focused on closing tax loopholes for crypto traders, hedge fund managers, and wealthy individuals. The current administration is determined to ensure that U.S. citizens pay their fair share of taxes on their crypto-related activities.
Judge Spero’s Ruling Highlights the Importance of Accurate Tax Reporting in Crypto
Magistrate Judge Spero’s ruling underscores accurate tax reporting for crypto participants, given Kraken’s large customer base and trading volume. Moreover, the lack of third-party reporting for cryptocurrency transactions increases the potential for customers to underreport their taxes.
The IRS’s John Doe summons to Kraken shows their determination to ensure cryptocurrency tax compliance and uncover any wrongdoing. Crypto industry parties with tax liabilities should take proactive steps and voluntarily contact the agency for compliance. Lastly, the IRS is intensifying efforts to address non-compliance, and courts are likely to support the agency over taxpayers.
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
