IRS Demands Kraken Hand Over Customer Records in Crypto Tax Probe
• The IRS is targeting Kraken, a major crypto exchange, for failing to provide information regarding its US customers who conducted crypto transactions worth $20,000 or more between 2016 and 2020.
• A recent filing petitioned the US District Court for the Northern District of California for an order that would enforce the IRS’ summons on Payward Ventures, a company within Kraken.
• If granted, this order would allow the IRS to access records concerning all cryptocurrency users in the United States and their federal tax liabilities.
IRS Investigation Targets Kraken Crypto Exchange
The Internal Revenue Service (IRS), the American tax authority, has taken action against Kraken, one of the world’s largest cryptocurrency exchanges. According to Law360,”Cryptocurrency exchange Kraken Inc. hasn’t complied with a court-approved IRS summons seeking records on customer identities and transactions and should be forced to furnish the records.” As reported in May 2021, a branch of the California District Court granted permission to issue a John Doe summons on Kraken in an effort to discover information about US residents who had conducted high-value crypto transactions over 2016-2020.
What Is A John Doe Summons?
A John Doe summons is used by the IRS when they need to obtain names and requested information from taxpayers belonging in certain groups. In this case, it is intended for taxpayers who have done USD 20,000 or more worth of crypto transactions within that period. The filing argued that this information was already in possession of the IRS and could potentially reveal identities and federal tax liabilities of those involved in cryptocurrency activities who may not have been compliant with their obligations.
Kraken responded stating that they had not yet been served with this petition but that they are “committed to engaging constructively with regulators” when necessary. They further stated that “Kraken does not tolerate criminal activity on its platform…[and] takes its compliance responsibilities seriously” as part of their commitment towards customers as well as legal compliance worldwide.
Implications Of This Action
This news has raised several questions among crypto enthusiasts including what could happen if these requests are enforced and how it might affect other exchanges operating in similar conditions or jurisdictions around them. However, at this stage it remains unclear what will come out from this investigation or if any action will be taken beyond simply issuing subpoenas or requests for information from companies like Kraken.
It is yet unknown how far this investigation will go or what kind of implications it will have both for US based traders as well as other countries where crypto trading is popular but unregulated by law enforcement bodies such as banks or governments . All we can do now is wait until further developments arise from either side before speculating further about potential outcomes from this case study involving Kraken inc., Payward Ventures LLP., and other subsidiaries associated with them .