Kraken to Share User Data with IRS After Court Order

United States-based cryptocurrency exchange Kraken is set to share user data with the Internal Revenue Service (IRS) in compliance with a court order. The exchange will send information related to approximately 42,000 users to the IRS in early November.

This decision follows a legal battle that began in May 2021 when the U.S. District Court for the Northern District of California authorized the IRS to serve a John Doe summons on Kraken. The summons aimed to identify potential tax evaders among Kraken’s clients. Kraken initially contested the IRS’s demands, leading to a reduced number of affected clients and the amount of data that would be shared.

The court order requires Kraken to provide the IRS with profile and transaction data for clients who conducted transactions exceeding $20,000 in any single year between 2016 and 2020. This includes users who made deposits and withdrawals but did not engage in transactions during that period.

The data shared with the IRS will include names, dates of birth, tax identification numbers, addresses, contact information, and transaction history. While the exchange had resisted the IRS’s demands, it successfully convinced the court to reduce the amount of personal information provided.

This situation is not unique to Kraken, as other cryptocurrency platforms have faced similar requirements from the IRS. In 2018, rival exchange Coinbase was ordered to share user data with the tax agency, affecting around 13,000 users. In addition, the IRS issued similar summonses to crypto exchange Poloniex and stablecoin issuer Circle in 2021.

The case underscores the ongoing debate surrounding user privacy and government regulation within the cryptocurrency industry. Kraken has positioned its compliance as a victory for privacy activists by preventing the IRS from accessing more extensive personal data.

As the crypto industry continues to evolve and adapt to regulatory demands, the balance between user privacy, tax enforcement, and regulatory compliance remains a complex and evolving challenge for exchanges and users alike.