Crypto exchange Kraken is contesting the United States Internal Revenue Service (IRS) and its request for crucial user information, and has asked a federal court in San Francisco to intervene. Kraken views the IRS’s demand for customer data as an “unjustified treasure hunt.”
Kraken’s resistance to IRS user information request
The crypto exchange’s resistance to the IRS comes in response to the agency’s February summons, which called for additional user data to identify Kraken accounts that conducted at least $20,000 in cryptocurrency trading in any single year between 2016 and 2020,
Kraken has cited the 2017 Coinbase case, stating that the tax agency has gone far beyond the guidelines set by U.S. District Judge Jacqueline Scott Corley.
In the Coinbase case, the IRS scaled back its initial demand following Coinbase’s persistent refusal. Judge Corley, however, determined that the summons sent to over 14,000 customers of the exchange was not overly intrusive, as the IRS had a legitimate reason to investigate taxpayers who may not be disclosing their Bitcoin gains.
Kraken’s lawyers argued that the IRS’s demands for customer information have gone “far beyond” its intrusive summons and are not justified. The exchange has joined Coinbase in resisting increased regulatory scrutiny from American regulators. Coinbase is currently fighting its own battle against the U.S. Securities and Exchange Commission (SEC) over providing crypto staking services.
Growing regulatory concerns for crypto companies
The SEC has alleged that staking services offered by companies such as Kraken and Coinbase violate securities law. Although the San Francisco-based crypto exchange settled with the SEC for $30 million for offering staking services, it has opted to take its IRS battle to court.
Increasing regulatory scrutiny is becoming a pressing issue for crypto companies in the U.S. CEOs like Coinbase’s Brian Armstrong and USD Coin issuer Circle’s Jeramy Allaire have warned that the growing pushback from regulatory bodies will force emerging crypto companies offshore.