The IRS issued a subpoena for Coinbase customer records, CoinBase fought back, and the case has been resolved.
CoinBase received a subpoena in December 2016 for access to the records of any individual who had traded bitcoin on the website in order to verify that no illicit activity had occurred. The scope of the subpoena would have impacted more than 500,000 US CoinBase customers. In an effort to establish some standards for operating in pre-existing legal frameworks, CoinBase fought the subpoena.
CoinBase expressed significant concern over the overly-broad scope of the request, which simply named “John Doe” as the user, and specified that it encompassed any U.S. residents who had traded bitcoin between Jan. 1st, 2013 and Dec. 31st, 2015.
Coinbase spokesman David Farmer had the following to say regarding the initial petition:
Although Coinbase’s general practice is to cooperate with law enforcement, we are very concerned with the indiscriminate breadth of the government’s request. We take user privacy rights very seriously and our legal team is in the process of carefully examining the government's petition.
The case was resolved when the United States District Court for the Northern District of California ruled that CoinBase will be required to turn over information on roughly 13,000 customers within 21 days from the court decision. CoinBase sent out a notification to their users on February 23rd to notify them what information was being requested.
Interestingly enough, users who only purchased the currency, but didn’t exchange it for traditional currencies or goods have been exempted from the IRS request. Additionally, any individual who traded less than $20,000 has been deemed “not even potentially relevant” by the court
Some of the information requested about 14,355 Coinbase account holders, following Case No. 17-cv-01431-JSC is:
- Date of Birth
- Taxpayer Identification Number (TIN)
- Account opening records
- Copies of passport or driver’s license
- All wallet addresses
- All public keys for all accounts/wallets/vaults.
- Records of Know-Your-Customer diligence.
- Agreements or instructions granting a third-party access, control, or transaction
- All records of account/wallet/vault activity including transaction logs
- Type of transaction (purchase/sale/exchange)
- Post transaction balance
- Names or other identifiers of counterparties to the transaction
- Requests or instructions to send or receive bitcoin where counterparties transact through their own Coinbase accounts/wallets/vaults
- All available information identifying the users of such accounts and their contact information.
- Correspondence between Coinbase and the user or any third party with access to the account/wallet/vault pertaining to the account/wallet/vault opening, closing, or transaction activity.
The IRS claims that only about 900 US taxpayers claimed “any property which may have been related to bitcoin” in their tax filings. More information can be found on the IRS virtual currency taxation standards here, directly from the IRS records.