Bitcoin Forum

I know this is a few days old news but I think it is very important and sensitive information particularly about crypto users and their privacy.

According to the article, the IRS has mount pressure on kraken since May 2021 demanding the exchange hand over extensive records on a large number of its American customers. Although Kraken fought back by filling a petition against them but not enough to get the IRS off it's back.

Kraken has agreed to deliver data on users who conducted more than $20,000 in crypto transactions – including trades, deposits, and withdrawals – during any year from 2016 to 2020 according to the article which makes me wonder why stop at 2020?

According the article, increased compliance from cryptocurrency firms could compel government to enact clear and friendly policies towards crypto. Do you agree to this?

Or do see this as contradicts the ethos of financial privacy and empowerment that attracts many people to cryptocurrency?

Source (https://www.ccn.com/news/kraken-crypto-tax-info-shared-with-irs/#:~:text=The%20US%2Dbased%20crypto%20excgange,has%20paid%20their%20fair%20share.)

Crap!!

Increased compliance will spur the government to tighten the ring around privacy and anonymity and demand that everyone make their crypto transaction information available to them in real time and anyone who seeks to stay off the grid will have to do that at an increased cost as they clamp down on all privacy related services.

Everyone should consider that centralized exchanges will in the end reveal your info to the government and that's just one of the risk using centralized exchanges poses, it also exposes your information to be stolen and you're dependent on their security network, not something you want to do with a decentralized asset.
You also don't own the keys.

They are not like Binance which is not under US government jurisdiction though. They fought back for just a year and Jessie probably just thinks it's not worth it as the IRS will be poking his ass every now and then.

IRS was hiring and training more than 87K agents that will enforce their laws, I heard these agents are gonna be carrying guns this time. So those who are in Kraken I guess can expect these agents to come knocking on their doors.

You link doesn't work, here it is https://www.ccn.com/news/kraken-crypto-tax-info-shared-with-irs/

Just like other users have pointed out, all this exchanges most especially those under a country’s regulations cannot beat the fact that the government will one day try to request details of its users. I somehow feel it is the main reason behind regulations of exchanges and also why the process  gets complicated like that of binance US because they possible can follow some of the rules set by the government.

One thing stands, once you provide your information to any exchange just be aware that the government can simply have access to it. The lies the government will spread in getting users details will be to protect them from fraud but it easily just to spy on its citizens on that platform

This also raises the question about the amount because it seems to me a very small amount. The most likely hypothesis is that the authorities are searching for information related to specific users as part of investigations into a specific case or incident.
It is true that it was and still is dangerous to trust central platforms in general, especially since we are in a market that is still not completely regulated, but it is noted that users in the United States are the most vulnerable to detection and tracking. This may have advantages within certain limits, but the extent of the violation of privacy cannot be overlooked. This will not only affect the reputation of the Kraken platform. All platforms will become more unreliable.

I wonder why kraken holds so many years back.
In Venezuela no bank holds data over 2 years.

Absolutely, and that also make me wonder if other countries government will adopt same method as the US Government because it seems this is mostly affecting the US branches of these exchange, binance USA also face similar regulation issues.
Are we heading towards the stage where other country's government will require same info from exchanges operating in that country. The main difference between crypto and traditional finance is the financial freedom and empowerment which users enjoy but with this type of force regulations from the government will raise concerns.   

2020 most likely because IRS have filed the claim back then. Now when they got it trough, they can just demand latest data and Kraken has to comply if they want to stay open. They don't have any point to fight and use more money anymore over that. I am not sure how people think that data was private in the first place. Or why kraken lawyers thought that they had a change. You don't have to know much to understand that IRS has total legal access on those.

For someone who doesn't know, this is how every exchange operates if they want to keep working on specific area.

I see regulated DeFi and regulated crypto coming. It might be against original ethos, but i really think that this is just too big of a machine to fight against.

Disappointing but not surprising news really. Kraken probably aren’t happy to provide the IRS with this information but if they are told to either comply or be denied to provide services in the US then I am sorry to break the news but they will be handing our info straight over to the IRS. It sucks but this is becoming far more common for crypto firms. They are being forced to comply with increasingly restrictive regulations.

This should not be surprising, it is a central service that collects and maintains data, and they will inevitably provide it to advertising companies or the government, so you should expect that once you use these platforms, your data will be sent to the government sooner or later, directly or through a third party. Will it be considered tax evasion if the data you provided in your tax return is different from what is contained in the Kraken data?
you may need to move this topic to legal board.

Centralized exchanges have to obey to many laws, regulations as well as request from governments and regulatory institutions to keep their business running.

It's a matter of time for a centralized exchange turns on their Mandatory KYC policy on their platform.
Under pressure from government, they can satisfy government by leaking data of their users.

We all know about that risk so it is not a shock news if Kraken exchange do it to the IRS.

Why KYC is extremely dangerous - and useless? (https://bitcointalk.org/index.php?topic=5221497.0)

We know that cryptocurrencies need to follow the rules set by regulators in order to be taken seriously. In theory, following the rules set by tax officials could push governments to make clear rules, which would then allow cryptocurrencies to become part of the regular economy. But really, why stop at 2020? The limited time frame makes me very suspicious about the reason for and range of this investigation

However, this action seems to go against the idea of financial privacy that is built into cryptocurrency deals. Cryptocurrencies are valuable because they are decentralized and give people power. Institutional acceptance and protecting the very core of cryptos are at odds with each other in this case. A fine line to walk, isn't it?

No one is supposed to feel surprised by these kind of news, really.
It was obvious that it would be just matter of time before the Internal Revenue Service would start to pressure exchanges based in the United States.
Actually, I would have expected exchanges like Binance US, Coinbase and Kraken to have already shared their clients' information with the government.

Though, it is important to point out that these kind of information is most likely to be shared to the European Union and the USA, other countries like those in Latin America, Africa or Asia are less likely to find exchanges willing to comply with such big request of information.
If anyone of you feel this is a clear violation to your privacy, then I would encourage you not to use centralized exchanges whatsoever.

Too late for us to worry about that anyway because even if they don't do that, the US already has a data on you and all they have to know, you freely provide it to them already (driver's license, credit card, ITR and many other government documents you have to fill up) so this isn't really something new or scary anymore. Remember when Snowden leaked what NSA did? Most Americans didn't even bat an eye that their own government is spying on them so nothing to worry. The neat trick is we don't know that they control us already for a long time now.

I'm not American and not a Kraken user, thankfully, but if you read the terms of service of exchanges, you can often notice that they reserve the rights to do all sorts of monitoring and share their data with various third parties, especially authorities. It's the downside of KYC and of centralized exchanges.
In this case, at least it's limited by transaction volume, although the limits are quite low over a course of a year, and I suppose the IRS is asking for that, so that they can act on it and fine those who haven't paid their taxes properly?

Due to the nature of cryptocurrencies, there is a clear boundary between pseudonym identity and KYC-linked wallet. User true identity cannot be tied to its address if and only if they did not use centralized third-parties and themselves does not link any related matter. Since they are using a centralized exchange, they should expect that privacy in the context of within article are given away and they must adhere and comply.

So I think that it just the article author opinion that deem people financial privacy were protected.

Even peculiar legal decisions from the government regarding crypto users could potentially occur once Kraken's user data is disclosed. kraken should ideally safeguard its users' data privacy unless they aim to witness a decline in their user base, particularly among steadfast Kraken supporters. it's challenging to trust anything coming from the government in relation to crypto. If it benefits the crypto community, there should be no need for data tracking.

I have no intention of protecting suspicious activities, but it's crucial to remember that the government can exercise its authority without constraints, and it's deemed legal. therefore, concerning any crypto-related activities, as long as cryptocurrency hasn't been universally adopted, the government might exploit it to extract from crypto users, whether through substantial taxes or asset seizures without substantial evidence.

Wow, you really did enumerate some scary stuff just to tell us that worrying about KYC is nothing more than a drop compared to the ocean that is the mass surveillance in US, I'm not too invested in learning all this although I know a thing or two about this stuff and given the way you articulated this stuff, I assume that it's a real scary stuff.

Given what @pinggoki just said, I don't feel as mad as I should be about Kraken releasing data to the IRS although I can see why it's still a problem, it's not like IRS purposefully taps in to this mass surveillance stuff to check the taxes and the incomes of the US citizens although I still don't like that Kraken caved in to IRS, I am sure they already know how much you owe them right?

Every single user of Kraken shouldn't see anything contradictory with this. There is no contradiction whatsoever. They cannot raise that. Otherwise, they're hypocrites. And they cannot also mention that financial privacy and empowerment are what attracted them toward cryptocurrency. In the first place, they used a centralized exchange, a platform that is licensed and registered and submits to regulatory policies. So, what's actually contradictory is the fact that they're supporting Bitcoin at the same time used a centralized platform for it. What do they expect, that they can have their cake and eat it, too?

RIP to those people who had thought crypto transactions through a centralized exchange won't attract taxes. Well such kind of risks will always be there if you are using a centralised crypto exchange. Doesn't matter if it is a company from United States or from Honolulu Island. As long as these two countries have data sharing agreement, you are screwed.

Kraken is a legal entity in United States. So they are bound to share the data to IRS or to any other government agency. All the best!

I don't know how far back can they charge you, but in Europe it's only 5 years back. They wanted data from 2016, so if that happened in the EU they'd be able to prosecute only those who did not report taxes after 2018 and by the time they go through all the data and find the exact numbers, it will be late 2024, meaning that only people who traded since 2019 will have something to worry about.

Anyway, I got burned by a similar situation. In 2017-18 banks were blocking transfers from crypto exchanges and I didn't want them to report me anywhere, so I found a local exchange that allowed to withdraw money from an ATM, without the need to send it to a bank. At the time it was the most anonymous way of turning bitcoin into cash that I knew, so I used it for a few months.
Then the exchange announced that they were asked by the government to share the data of and all transfers of people who withdrew from them. They did not have much of my data, but they had my full name, email address, the location of the ATM where I was withdrawing... That was a warning for me to hide everything I do, so I immediately closed my account with them and started looking for an even more anonymous way to exchange.

Bottom line, don't send your private data anywhere. If you just use your full name and address, you can always claim it wasn't you and it had to be someone else who knew you and wanted to hide himself behind an alias. If you send them your ID and withdraw to your personal bank account, it's game over.

And you're safe from the government asking about your transaction? That's kinda surprising. I'd assume they keep your data even though you asked them to delete your account. It is difficult to trust a third-party service to keep its promise to protect user's privacy considering how often a data leak happens, or how often they sold it to other parties.

That sounds unrealistic unless you're fine with not using any centralized service at all. Wouldn't you risk getting a fine or something similar if you're trying to lie your way through it though? I'd rather not use any service at all if that is the case.

I didn't feel completely safe at the time, but I had a total of between EUR 2 and 3k of transactions, which if you don't have any other income is tax free, so I've decided to do nothing and hope they don't find the amount interesting enough to start their investigation. If I had more than 10k in withdrawals, I'd quickly pay the tax. According to the tax law if you pay what you owe before they officially inform you of an investigation, you can't be charged. That was probably what they were actually trying to achieve. They wanted to scare people enough so that they'd pay up.


Not "any service at all" just not using a centralized bitcoin exchange that requires KYC. Some exchanges don't require it as long as you stay below a certain threshold. In the EU it's 1k Euro.
You can in fact find exchanges and ATMs where you can withdraw up to that limit anonymously.

Well now the sec is suing Kraken exchange over the failure to register. The sec is saying Kraken is operating illegally without first registering with the sec.
Kraken said it will defend in court and the customer funds are safe. https://blog.kraken.com/news/kraken-continues-to-fight-for-its-mission-and-crypto-innovation-in-the-united-states
https://www.fxstreet.com/cryptocurrencies/news/breaking-sec-sues-kraken-exchange-for-staking-securities-202311202229

If i were a customer in this exchange i don't think i want to wait around to see if kraken will win or not, even if they claim customer funds are safe, i will take out my funds to safety and let them fix their issue before maybe returning back. This doesn't sound good in my opinion, after agreeing to work with the sec to release customer data now they get a hit from same sec?

Which friendly? Governments do not have any friendly policy towards cryptocurrencies, neither now nor in the future. They only pursue one policy, which is complete control while eliminating anything related to privacy.

This is the only case in which governments can have a friendly policy towards cryptocurrencies, I mean when crypto exchanges turn into something more like banks under the complete control of the government.

This thing that governments are seeking is completely inconsistent with the concept of Crypto.

Interesting to see how this unfolds. It seems the SEC is getting more and more strict in enforcing regulations regarding cryptocurrency exchange. The user data request is just beginning, they are now figuring out what and how exchanges might get persecuted. Nevertheless, judging by information from their press release, they are pretty confident to go into the litigation. I believe a firm and compliant exchange business would surely try to adhere to any regulation or policies required to operate the business, as long as it is clear.

On the other hand, this is a wake-up call for exchanges that serve US customers to aware of this upcoming. This indicates that they may also get the same fate, if they are big enough and did not follow any updates regarding regulation requirements.

Well, that was easy see this coming. After what happened to Binance and CZ, I guess no exchange is willing to confront the US government/FED/IRS. There's no way exchanges can fight or withstand that blackmailing going on. So every exchange now will be cooperating with FED or IRS to avoid possible fines, bans, trials etc. They're not trying to kill Bitcoin anymore, but rather trying to control it.