Should the Internal Revenue Service (IRS) have authority to make financial-services companies turn over millions of customer records when they suspect a handful of customers could be evading taxes? This is exactly what the IRS is attempting to do with popular cryptocurrency service provider Coinbase, Andrea O’Sullivan explains. And if the agency prevails in this privacy-violating crusade against cryptocurrency users, it could have big implications for the future of everyone’s digital privacy.
The IRS initiated a “John Doe” summons against Coinbase in November, attempting to secure information on suspected tax cheats that use the service. But rather than tailor a subpoena to a narrow group of likely tax-evaders, the IRS instead requested all transaction records between 2013 and 2015—an alarmingly broad net that casts Coinbase customers as possibly guilty until proven innocent. In early December, a federal judge in San Francisco approved federal tax collector’s request, which Coinbase is now fighting in court as too broad and unnecessarily punitive. Meanwihle, the IRS’s broader policies with regard to cryptocurrency have created a major reporting burden for casual cryptocurrency users and institutional traders alike, and even ended up imposing significant costs on the IRS itself.
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