Exchanges must hand over data on users who trade $20,000 per year.
Kraken has been ordered to provide information about its users to the United States Internal Revenue Service (IRS), according to a court filing on June 30.
Users with a transaction volume of $20,000 or more were affected
Kraken must provide the IRS with the identities of users who traded at least $20,000 worth of cryptocurrencies in a year, the filing said. This applies to users who were active between January 1, 2016 and December 31, 2020.
The court ruled that Kraken must share certain information, such as usernames, dates of birth, tax ID numbers, addresses, and contact information.
Among other things, the court acknowledged that the information requests made by the Kraken government were overbroad. Notably, it considered the tax agency’s requests for KYC/AML data and information about users’ employment, net worth, and source of wealth to be overbroad. As a result, Kraken has not been required to provide that data to the IRS.
In addition to providing user information, Kraken must also provide certain on-chain information, such as transaction hashes and blockchain addresses. Kraken must provide accounts’ blockchain data volumes for “chain splits,” or hard forks, which could affect user holdings but have not been fully observed in Kraken’s records.
Finally, Kraken must provide certain transaction records, namely those that were not found to fall under the government’s overbroad requests.
The IRS has been hunting for Kraken data for years
The Internal Revenue Service (IRS) has been trying to obtain Kraken’s user records since at least May 2021, when it was allowed to issue a subpoena to the exchange. The current case began in February 2023, after officials began trying to enforce the 2021 subpoena.
The tax agency has previously gained access to customer data from other crypto platforms including Coinbase, Circle and SFOX.
Recent surveys have shown that even if rules exist, the vast majority of cryptocurrency investors do not pay taxes on their investments and gains. The IRS’ various actions against cryptocurrency exchanges are undoubtedly intended to combat this phenomenon.
