The Internal Revenue Service (IRS) acts as the official revenue service acting on behalf of the U.S federal government. It is thus responsible for the collection of taxes as well as the administration of the IRC (Internal Revenue Code), which is the primary body of federal statutory law governing tax in the United States of America.
Recently, the IRS managed to gain access to the user data of the crypto exchange Circle, under the reasoning of ensuring that cryptocurrency investors and owners are still paying the appropriate amount of taxes.
IRS to collaborate with Department of Justice
It was not long after gaining access to Circle’s data that the IRS turned its attention to Kraken, which is a U.S based crypto exchange that had been founded in 2011. In addition to providing price and financial information to the computer software system Bloomberg Terminal, Kraken also focuses on providing crypto-to-fiat conversion and money trading.
The IRS had managed to gain authorization from the relevant courts for the purpose of obtaining financial records for different crypto exchanges, and after the success with Circle, the next target is Kraken. The IRS remains adamant that whoever conducts any kind of transaction with cryptocurrency is required by the law to pay taxes just like everyone else.
To this end, David Hubbert, who is currently the Acting Assistant Attorney General for the Tax Division under the Department of Justice, added that the IRS would be seeking assistance and cooperation from the Department of Justice itself in order to ensure the fair payment of taxes by cryptocurrency investors and owners.
Kraken is the next target
Following the success with Circle, Kraken is next in line to be inspected by the IRS. However, much to the relief of the crypto exchange, the court has since denied this request, saying that the IRS is overreaching and that asking to gain access to Kraken’s personal records is going ‘overboard.
The court has claimed that the request filed by the IRS is too broad and needs to be narrowed down to its specifics. The judge had stated that any requests by the IRS pertaining to the accessing of sensitive information could wait until a basic review of the account registration and appropriate information can be conducted, along with an analysis of the relevant transaction histories. As of the time of this writing, the IRS only has ten days to file a new request as per the court’s orders, as cryptocurrency exchanges, owners and investors alike eagerly await what will transpire in the near future.