Cryptocurrency exchange Kraken is battling the IRS and its demands to turn over key exchange user information to the courts. The exchange dismissed the IRS request for customer information as an "unreasonable treasure hunt."
According to Bloomberg, the cryptocurrency exchange has asked a San Francisco federal court to intervene in the matter, as well as a concession from the IRS. Kraken's pushback against the IRS came in response to the agency's February subpoena requesting additional user inform cation to identify Kraken accounts that made at least $20,000 in cryptocurrency transactions in any one year between 2016 and 2020.
Citing the 2017 Coinbase case in its request, the exchange said the tax agency had gone far beyond the rules set by US District Judge Jacqueline Scott Corley. In the Coinbase case, the agency scaled back its initial request following repeated rejections from Coinbase. Judge Corley argued that the subpoenas sent to the exchange's 14,000-plus customers were not too intrusive because the IRS had legitimate reasons to investigate taxpayers who may not have disclosed their bitcoins.
Kraken's lawyers claim that the IRS has gone "well beyond" the scope of its intrusive subpoenas and that its requests for customer information are unwarranted. Kraken joins Coinbase in its efforts to fend off increasing regulatory scrutiny from US regulators. Coinbase is currently battling the SEC over offering crypto staking services. The SEC claims that staking services provided by companies such as Kraken and Coinbase violates securities laws. While the San Francisco-based cryptocurrency exchange settled with the SEC for providing staking services for $30 million, it h as decided to take it IRS battle to court.
Increased regulatory scrutiny has become a growing concern for US cryptocurrency companies. Coinbase CEO Brian Armstong and USD Coin issuer Circle CEO Jeramy Allaire, among others, have warned that growing resistance from regulators will force fledgling cryptocurrency firms to move offshore.
