Key Insights
- Kraken will share transaction details and personal information of 42,000 U.S. customers with the IRS due to a court order.
- The U.S. District Court’s ruling required Kraken to provide data on users with transactions over $20,000 between 2016-2020.
- Privacy advocates express concerns about this decision, viewing it as a dangerous precedent for financial surveillance.
Cryptocurrency exchange Kraken announced it will provide the transaction details and personal information of over 42,000 U.S. customers to the Internal Revenue Service (IRS) in compliance with a court order.
Kraken received the summons demanding customer records in May 2021 and initially fought the request in court. However, a ruling by the U.S. District Court for the Northern District of California mandated that Kraken turn over data on users who conducted over $20,000 in transactions from 2016-2020.
The company said it negotiated to “substantially reduce” the original scope, with around 42,000 accounts now impacted instead of hundreds of thousands initially. The court order covers names, addresses, tax IDs, birth dates, contact information, and full trading history.
This massive handover of customer data has alarmed privacy advocates. “This ruling establishes a dangerous precedent for financial surveillance,” said Max Abrams, analyst at the Cato Institute.
Kraken’s disclosure comes as the IRS battles in court with other exchanges like Coinbase over similar requests for mass user information to crack down on potential tax evasion.
In a closely-watched case, the U.S. Court of Appeals is currently reviewing an order for Coinbase to provide tax data on 13,000 users. The DeFi Education Fund recently filed a brief supporting a user’s appeal to protect privacy.
“Handing carte blanche access to personal finances to the IRS contradicts the 4th Amendment,” said Melisa Warren of the Electronic Privacy Information Center. She urged courts to limit the scope of disclosures.
The IRS crackdown aims to track down U.S. taxpayers not properly reporting crypto income. However, privacy advocates argue indiscriminate disclosures go too far and undermine digital asset ownership protections.
As exchanges weigh compliance versus protecting customers, user privacy remains at stake in ongoing legal battles.