Court orders Bitcoin investor information be turned over to IRS

Internal Revenue Service officials suspect the electronic currency could be used for tax evasion purposes in the U.S., though they have no proof of investors doing so currently.
By Stephen Feller   |   Dec. 1, 2016 at 2:16 AM

WASHINGTON, Dec. 1 (UPI) -- The company Coinbase, the largest Bitcoin exchange in the United States, may be required to turn over customer data to the Internal Revenue Service because the agency is concerned the cryptocurrency is being used to avoid paying taxes.

A federal judge in San Francisco granted a request by the IRS and U.S. Department of Justice to issue a "John Doe" summons that would require Coinbase to identify users in the U.S. who made transactions on the service between 2012 and 2015, based on at least three previous cases showing Bitcoin could be used to evade federal taxation.

Coinbase was launched in 2012 as a digital wallet where customers buy, sell and store their Bitcoin -- they're one of many online banks around the world handling the digital currency. Bitcoin, created in 2009, is a traded currency maintained by a distributed network of computers and is not backed by a government or agency while also encrypting the identity of Bitcoin owners.

"Transactions in virtual currency are taxable just like those in any other property," IRS Commissioner John Koskinen said in a press release. "The John Doe summons is a step designed to help the IRS ensure people doing business in the emerging economy are following the tax laws and meeting their responsibilities."

In mid-November, when the Department of Justice filed suit to issue the summons, the agency said an IRS agent identified three cases of cryptocurrencies -- there are more than 1,000, with Bitcoin by far being the most popular -- being used to evade paying taxes.

Coinbase has said in several statements since the Justice Department filed suit that it puts the privacy of its users first and foremost and will fight the government request for information, especially considering the request is for all records, not just people under investigation.

"We are aware of, and expected, the Court's ex parte order today," Coinbase said in a statement. "We look forward to opposing the DOJ's request in court after Coinbase is served with a subpoena. As we previously stated, we remain concerned with our U.S. customers' legitimate privacy rights in the face of the government's sweeping request."

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