Kraken, a cryptocurrency exchange based in San Fransisco, finds itself in a legal dispute with the Internal Revenue Service once again as the latter has requested to look into its user details, including personal data and transaction history. Kraken has already once denied the summons request from IRS in 2021 to customer privacy. With this summons, the IRS seeks to look into customers’ tax liabilities and identify signs of theft or manipulated data.
District court issues order to let IRS access Customer Data
Under an injunction issued by a US District Court for the Nothern District of California, Kraken has to grant IRS access to all transactional data of its customers as well as account details as IRS claims that they will need that information to identify users who may have misrepresented or underreported their taxes.
According to the decree, Kraken must divulge the data concerning transactions made more than $ 20,000 in one calendar year, which data might consist of real or false names, dates of birth, taxpayer identification numbers, contact information (phone numbers and emails ids) and other similar data.
Kraken fights IRS back, claims intrusion of customer privacy
The Kraken team, however, has a lot to say against such intervention on the part of the IRS and has done its best not to expose its users to accusations related to the misrepresentation of their accounts. The exchange has committed to protecting its users from being exposed to identity theft or any other harm.
According to Cryptoslate, a Crypto News outlet claiming to have obtained a statement from Kraken, the exchange has responded to the proceedings by claiming to protect their users against unnecessary harassment and protect customer privacy. The statement goes:
“We fought the IRS because they sought intrusive and unnecessary information about U.S. clients… Were this information leaked by the IRS, it would expose Kraken clients to identity theft and other harm, which Kraken prevented.”
Kraken stands by Court’s Decision to restrict IRS demand for data
Although access to some of the data demanded by the IRS was granted to them by a court ruling, in which they were allowed to track details of users who made transactions over certain thresholds, the court denied their request to obtain Know Your Customer (KYC) and Anti-Money Laundering Information(AML), which includes net worth, details of job and source of wealth.
The Kraken representative also thanked the Court for its decree restricting the IRS’ access to the personal data of their users, claiming that the initial demands of the latter were too overreaching. Kraken emphasized its commitment to the protection of customer privacy as the exchange cited its successful defense.
In the June 30th order of the Court, Judge Joseph C. Prospero spoke on the matter of the government’s purpose for looking into the personal transaction information of users:
“The Government has a legitimate purpose for seeking the materials described in the summon. As discussed above, the summons was issued in connection with an investigation by the IRS to determine the identity and correct federal income tax liability of U.S. persons who conducted transactions in cryptocurrency during the period 2016-2020.”
The summons to Kraken by IRS is not the first instance of higher authorities intervening in crypto operations in the country. Previously, Kraken had also entered into a settlement with U.S. Security and Exchange Commission (SEC) on the latter’s security law violations related to Kraken’s staking service. The actions taken by SEC and IRS combined have caused a lot of people to see this kind of intervention as an attack on the independent operations of the crypto industry. Many cryptocurrency houses have strongly disliked the extremely suffocated, anti-crypto climate in the US whereas other countries follow a much more relaxed policy.
