Kraken, a leading cryptocurrency exchange, has requested the intervention of a San Francisco court to protect its user data from what it deems to be overreaching demands by the United States Internal Revenue Service (IRS).
The IRS had issued a summons to the crypto exchange in an effort to obtain comprehensive data on its users’ transactions. The tax agency’s goal was to identify US taxpayers who might have failed to report their cryptocurrency holdings and trading activities, as well as any associated tax liabilities.
However, Kraken has taken legal action to contest the summons, arguing that it is overly broad and violates the privacy rights of its users. The company has requested that the court limit the scope of the IRS’s demands, asserting that the summons should only pertain to individuals who are reasonably suspected of tax evasion.
Kraken’s legal team stated that the IRS’s summons would require the exchange to divulge a vast amount of sensitive user data, including full names, addresses, phone numbers, and transaction histories. They argue that such a request is both intrusive and unnecessary, as it would affect users who have complied with tax regulations.
The exchange also highlighted the precedent set by a similar case involving Coinbase, another major cryptocurrency platform. In that instance, the court ruled that the IRS’s demands were too extensive and required the tax agency to narrow the scope of its request.
By taking legal action, Kraken aims to defend the privacy of its users and ensure that the IRS’s demands do not infringe upon their rights. The outcome of this case could have significant implications for the broader cryptocurrency industry, as exchanges grapple with regulatory requirements while striving to maintain user privacy.
