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Breaking: Coinbase Files Motion to Block IRS Acesss of Bitcoin Users’ Info

Samburaj Das on 14/12/2016

In an expected development, bitcoin exchange Coinbase has filed a motion [PDF] in a San Francisco federal court to block the Internal Revenue Service from accessing transaction records of bitcoin users.

The IRS filed a civil petition on November 17, targeting transaction records of bitcoiners registered with the exchange between January 2013 and December 2015. On December 1, a federal judge approved the IRS summons demanding Coinbase to reveal the transaction records.

An excerpt from the introduction of the motion filed by Coinbase in response to the IRS request reads:

   Based on three isolated incidents and scant other facts, the IRS seeks that Coinbase identify over 1 million American citizens that have transacted in virtual currency and to provide data on every single transaction by those 1 million clients over a 3-year period.

This fact is stated several times within its motions.

Here’s another takeaway:

   The IRWS is now seeking millions of records concerning virtual currency transactions under the guise of investigating compliance with the vague tax guidance that it has been unwilling, or unable, to clarify.

“Further, the Chairman of the IRS has repeatedly expressed his concern that the IRS is strapped for resources, such that it cannot effectively investigate tax compliance,” the motion continued. “Finally, the IRS Summons does not contain any dollar value or transaction thresholds, and seeks personal information concerning Coinbase’s customers that has absolutely nothing to do with taxation issues.

Damningly, the motion filing added:

   Putting these facts together easily suggests that the IRS has an ulterior motive in issuing the subject summons. Indeed, recent scandals reflect that the IRS is not unwilling to use its powers for non-tax collection purposes.

Coinbase also pointed to a November report by the Treasury Inspector General for Tax Administration who basically scolded the IRS for its lack of a plan or program to properly address income streams produced via virtual currencies.