According to a court filing on June 30, Kraken has been ordered to provide user information to the Internal Revenue Service (IRS), specifically regarding users who conducted transactions amounting to $20,000 per year.
Users Who Conducted Transactions Worth $20,000 Were Affected
The court filing states that Kraken is required to provide identifying information to the IRS regarding users who conducted cryptocurrency trades worth at least $20,000 between January 1, 2016, and December 31, 2020.
The court ruled that Kraken must share specific information such as user names, birth dates, tax numbers, addresses, and contact information.
However, the court acknowledged that the government’s information requests were overly broad. In particular, it deemed requests for KYC/AML data and information regarding users’ employment, net worth, and source of wealth to be excessive. Therefore, Kraken is not currently obligated to provide this data to the IRS.
In addition to user information, Kraken must also provide certain blockchain-related data, such as transaction hashes and blockchain addresses. The amount of blockchain data that Kraken must provide takes into account “chainsplitting” or hard forks, which can impact user holdings but may not be fully reflected in Kraken’s records.
Lastly, Kraken must provide specific transactional records that do not fall within the government’s overly broad requests.
The IRS Has Been Seeking Kraken’s Data for Years
The IRS has been attempting to obtain Kraken’s user records since at least May 2021, and the current case began in February 2023 after officials made efforts to enforce the summons issued in 2021.
The tax agency has previously obtained access to customer data from other cryptocurrency platforms such as Coinbase, Circle, and SFOX.
Recent surveys indicate that the majority of crypto investors do not pay taxes on their investments and earnings, even when regulations are in place. The various actions taken by the IRS against cryptocurrency exchanges are undoubtedly part of their efforts to address this issue.