Kraken receives court order to turn over customer data to IRS

Crypto exchange Kraken has been asked by the Internal Revenue Service (IRS) through a federal court order to provide account and transactional information.

According to the June 30 court filing, the IRS needs the information on Kraken accounts that traded at least $20,000 of a cryptocurrency over a year, which applies to active users between 2016 and 2020. 

Initially, the IRS had filed a petition on Kraken in the Northern District of California in February. This petition case, shortly after the exchange had settled charges the U.S. Securities and Exchange Commission filed saying that it had violated securities law through its staking service. In the filing, the IRS said it had given Kraken a summons in 2021 but failed to comply.

Kraken’s latest order necessitates that the exchange provides information on its users who transacted over 20,000 in a year between January 1, 2016, and December 31, 2020. The information is expected to capture the user’s name, birthdate, address, phone number, email address, taxpayer identification number, and other documents. In addition, they will provide on-chain information, such as the blockchain address of the user and the transaction hashes, which may give the IRS raw data. 

However, the judge, Joseph Spero, revoked the IRS’s request to provide employment details of Kraken users and their wealth source. He emphasized the need to narrowly tailor the summon to what was necessary to achieve the intended purpose. 

IRS has been after Kraken since 2021

The IRS has been on Kraken’s radar since May 2021, when it attempted to acquire its records. The case began in February 2023 as the IRS tried to enforce the 2021 summons. In April, Kraken challenged the IRS’s request claiming the demands represented unwarranted intrusion and hence the federal court needed to intervene.

Kraken is one of many exchanges from which the IRS has asked to obtain data. The agency has gotten data from Circle, Coinbase, and SFOX. 

Recent surveys note that most crypto investors refrain from paying taxes on their earnings despite the rule existing. The IRS is hence making moves to curb these actions. Meanwhile, the summon comes a day after President Biden’s directive to eliminate loopholes in the crypto taxation space to promote a fair tax share to everyone.