Kraken is required to give information about users who made transactions totaling more than $20,000 in a single calendar year.
The Internal Revenue Service (IRS) has been ordered to receive account and transaction information from cryptocurrency exchange Kraken in order to conduct an investigation into possible user tax underreporting.
On June 30th, the court issued an order requiring Kraken to reveal information about users who made transactions totaling more than $20,000 during a calendar year. This information includes personal data such names, birthdates, taxpayer identification numbers, residences, and contact details.
In reaction to Kraken’s settlement with the U.S. Securities Exchange Commission (SEC) over securities law violations linked to its staking business, the IRS filed a court petition in February. The IRS asserted that it had previously sent a summons to Kraken in 2021, which the exchange did not abide with, and that it is now attempting to investigate the tax liabilities of consumers who transacted in cryptocurrencies between 2016 and 2020.
Along with user data, Kraken will also have to submit blockchain addresses and transaction hashes, which are already part of the shared transaction data. Although specifics weren’t addressed in the study, the exchange might also need to give the IRS raw data.
The IRS’s attempt to get work details and the source of Kraken’s money from him was refused by the case’s judge, Joseph Spero. The court must make sure that the government’s summons is suitably focused and does not go beyond what is necessary to achieve its intended objective, according to the judge, who rejected numerous of the IRS’s requests
The court determined that certain of the IRS’s inquiries were excessively broad and went beyond what the majority of users required to prove their identities, particularly those aiming to identify Kraken account holders who fit the “Doe” designation. This signals that while resolving the IRS’s tax probe, the court will balance user privacy concerns.
The decision represents greater IRS enforcement and scrutiny in the crypto industry as the organization works to guarantee tax obligations are being met. The IRS may conduct additional investigations or take other legal action as a result of Kraken’s disclosure of user information, which could have consequences for the users who were impacted.