United States-based cryptocurrency exchange Kraken has announced that it will comply with a court order to share the data of 42,000 users with the U.S. Internal Revenue Service (IRS). The exchange received a court summons from the U.S. District Court for the Northern District of California in May 2021, demanding a wide range of records and data on its U.S. clients. Kraken objected to the IRS’s demands and fought the summons in court, leading to a reduction in the number of affected clients and the amount of client data. The court ordered Kraken to provide profile and transaction data for clients who had transactions exceeding $20,000 during any single year from 2016 to 2020, including those who made deposits and withdrawals without any transactions. The information will be submitted to the IRS in early November.
This case follows a similar situation involving cryptocurrency exchange Coinbase, where the IRS demanded user data. In that case, Coinbase informed its 13,000 affected customers that it would provide the IRS with their taxpayer IDs, names, birth dates, addresses, and historical transaction records. One user, James Harper, appealed against the IRS to protect users’ transaction privacy. The U.S. Court of Appeals for the First Circuit is currently reviewing this case. In October 2023, the DeFi Education Fund, a cryptocurrency advocacy group, filed an amicus brief in support of Harper’s appeal, addressing the issue of crypto privacy rights under the Fourth Amendment. These developments highlight the ongoing debate around the balance between user privacy and regulatory requirements in the cryptocurrency industry.
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