Coinbase Ordered to Turn Over Identities of 14,355 Cryptocurrency Traders > IRS

[BADecker]

Coinbase Ordered to Turn Over Identities of 14,355 Cryptocurrency Traders to the IRS

On Tuesday, a California federal court ordered the popular cryptocurrency exchange and wallet service Coinbase to turn over records on thousands of customers to the Internal Revenue Service.

The requested records include the name, birthdate, address, and account activity for any user who bought, sold, sent, or received more than $20,000 worth of Bitcoin in their accounts between 2013 and 2015.

The order marks the end of a year-long court battle between the IRS and Coinbase that began last November when the IRS sought user records for all Coinbase customers. After meeting resistance from Coinbase and Coinbase customers, who argued that the order was overly broad, the IRS narrowed the scope of its request to only cover Coinbase customers who had trafficked in more than $20,000 worth of cryptocurrency in the specified time period.

Read the full court order here.

According to an internal Coinbase audit from July, of the 14,000 affected users, 6,200 had bought, sold, sent or received less than $60,000 between 2013 and 2015, based on an internal Coinbase audit. This arguably makes them rather small fish

Read more and click the links at https://motherboard.vice.com/en_us/article/ywnmkk/coinbase-irs-14000-bitcoin-tax.

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[AltsBoom]

Ah sigh you knew that was going to happen eventually and that the courts would rule in IRS favor. I can only wonder how many other companies this is going to happen to in the coming years and makes me a bit worried. I am not even American and this worries me, it seems the anon part of crypto will cease to exist . Hopefully privacy coins like DeepOnion, Monero, Dash can help us in regards to these problems.

[BADecker]

Questions of Regulation, Taxation Loom Over Crypto Investors

The legacy of the W.J. Howey Company lives on, though not in a way the owners of the Florida citrus grove would have likely envisioned.

Seven decades after its legal battles with the SEC, the company has been enshrined with near legendary status in the cryptocurrency space, as the investment contract test every initial coin offering token is being judged by.

"Many of us lawyers studied this Howey case when we were in law school, and we couldn't have, in our wildest dreams, imagined going into a room like this where it could be recited like it's the Pledge of Allegiance," joked Lewis Cohen, a partner with Hogan Lovells, during a legal panel Tuesday at Consensus: Invest in New York.

As the world of cryptocurrencies and ICOs continues to race ahead, the lingering questions the test elicits in the ICO community about how these tokens will fit within existing legal and regulatory frameworks remains the elephant in the room.

Perhaps the most pressing question is whether there is a distinction to be made between tokens that function as securities and those that have a broader utility for a future platform.

In that regard, the Simple Agreement for Future Tokens (SAFT) framework, which sought to advance the dialogue of what a two-tiered token sale that separates the primary and secondary markets might look like, has received a good deal of optimism.

But yesterday at the conference, multiple speakers poured cold water on the concept and suggested a return to the drawing board.

Matthew Roszak, co-founder and chairman of blockchain startup Bloq, said:

"I'm not a huge fan of [SAFT]. I think trying to hermetically seal that pre-ICO financing is not as democratized and open as you'd like it to be."

Read more and click the links at https://www.coindesk.com/questions-regulation-taxation-loom-crypto-investors/.

[uszaty43]

I saw it yesterday, but there is nothing to be worried about.

The same happened on July, the IRS asked to coinbase to send some verifications, but they didn't do anything, and it was published in here, and everybody was talking about it like if it was the real CRASH of bitcoin.

Nothing is going to happen guys, just be quiet, i am sure that probably not even the 1/10 of the users in here were moving more than $25,000 worth of bitcoins a few years ago.

That is more than $300,000, that is why the IRS is looking after them now.

[HabBear]

The same happened on July, the IRS asked to coinbase to send some verifications, but they didn't do anything, and it was published in here, and everybody was talking about it like if it was the real CRASH of bitcoin.

I believe this is part of the same request. Coinbase has been fighting the obligation and quazi negotiating with the IRS all year. The previous request was for any transaction of $10,000 or greater. At least the dollar amount has increased. I'm curious how the IRS is going to use this information. If you buy Bitcoin from Coinbase and then it is sent to another address, there is no way to know verify the money was used for a purchase or transfer unless a receipt exists or something.

What's very clear is that bitcoin use needs to coexist (happily) with tax laws. As soon as it becomes a tax haven the government will crack it down and make it impossible to use, i.e., banning merchants from accepting it as payment, etc.

[audaciousbeing]

And now it has happened which is what I have always maintained that coinbase does not have any option than to obey the law because doing otherwise would then mean that they are disobeying the law of the land which equally comes with its own consequences. This will set another tone for bitcoin in the United States that you either give government what its exactly its own, or it comes after you will the full force of the law in its arsenal.

This will equally come with a set back because people will start looking for ways out to convert their coins to fiat instead of using coinbase as the only option. Also, to those thinking that coinbase will not give them your information, right now, they don't even need your permission to release such.

[cindygirl]

It's no shock to see the courts ruling in the IRS's favour and against cryptocurrencies. I hope that somehow this can be fought off and such things can be overcome in the future, I do not know the ins and outs of the law but it seems to me that companies should not be able to hand over individuals details without foretelling them that they will do so.

[BADecker]

The same happened on July, the IRS asked to coinbase to send some verifications, but they didn't do anything, and it was published in here, and everybody was talking about it like if it was the real CRASH of bitcoin.

I believe this is part of the same request. Coinbase has been fighting the obligation and quazi negotiating with the IRS all year. The previous request was for any transaction of $10,000 or greater. At least the dollar amount has increased. I'm curious how the IRS is going to use this information. If you buy Bitcoin from Coinbase and then it is sent to another address, there is no way to know verify the money was used for a purchase or transfer unless a receipt exists or something.

What's very clear is that bitcoin use needs to coexist (happily) with tax laws. As soon as it becomes a tax haven the government will crack it down and make it impossible to use, i.e., banning merchants from accepting it as payment, etc.

If you can negotiate them up to $20,000 from $10,000, why can't you negotiate them up to $20,000,000?

[bakunawaaa]

Can you please share a news article not from the crypto world. This is pretty big news and I am sure that the media will be covering this if it is true. This has a huge impact on the crypto currency market. Though it is true that through otc transactions you can hide your identity from the government, but I think the value of bitcoin shot up when crypto currency exchanges were set up, however with the government's regulation and these kinds if moves it defeats the purpose of anonymity in a way. I wonder whats next.

[tomahawk9]

At least Coinbase put up a fight against the IRS, apparently the IRS aren't used to go to court and companies just handed over the records when they were asked to disclose information. And at least the system isn't as greedy as we thought, the Court actually took the privacy rights of the costumers as a priority so Coinbase doesn't need to disclosure the entire database from 2013-2015.

But this doesn't change the fact that Coinbase is pure garbage, terrible customer service, extremely high fees, downtimes whenever there's a big movement on the market (like the recent crash they had when the price reached 11k), no scaling solutions to handle high traffic, etc, etc. I'm still amazed that one of the biggest (if not the biggest) exchange in the world is probably the worst exchange in the world.

[South Park]

At least Coinbase put up a fight against the IRS, apparently the IRS aren't used to go to court and companies just handed over the records when they were asked to disclose information. And at least the system isn't as greedy as we thought, the Court actually took the privacy rights of the costumers as a priority so Coinbase doesn't need to disclosure the entire database from 2013-2015.

But this doesn't change the fact that Coinbase is pure garbage, terrible customer service, extremely high fees, downtimes whenever there's a big movement on the market (like the recent crash they had when the price reached 11k), no scaling solutions to handle high traffic, etc, etc. I'm still amazed that one of the biggest (if not the biggest) exchange in the world is probably the worst exchange in the world.

Agreed at least they put a fight and while they did not win, as expected, at least they defended the privacy of most of its users, now this show to us that we need to get decentralized exchanges running as soon as possible , there are some but none of them performs as well as a centralized exchange.

[uszaty43]

But what are their real purposes? We all know that they only want to make as much money as they can.

What's very clear is that bitcoin use needs to coexist (happily) with tax laws. As soon as it becomes a tax haven the government will crack it down and make it impossible to use, i.e., banning merchants from accepting it as payment, etc.

I dont understand what are their real purposes, probably most of those people who were moving $25,000 on the past, were those who were lucky and could buy bitcoin when it was less than $100-200 each bitcoin, and they wanted to sell it when it was probably $300 or $500, who knows?

Now that the price is very high, it doesnt mean that they are tax evasors, it is all the opposite, they want to make profit from that, and if they dont pay the taxes, they go to jail.

But not even 2 of 10 users from those are still using coinbase, who would be holding 300k in coinbase? nobody.

[Cozy]

My question is what about those who used coinbase after 2015 what about those customers?

[figmentofmyass]

It's no shock to see the courts ruling in the IRS's favour and against cryptocurrencies.

more than that, the writing was on the wall when the IRS made the original request. it was a very obvious fishing expedition. legal experts from e.g. coincenter were speculating immediately afterwards that the request would be denied, but that a second "reasonably narrowed" request would likely be approved. in other words, the initial IRS request was just a bargaining chip to net as many accounts as possible in the subsequent court order.

I hope that somehow this can be fought off and such things can be overcome in the future, I do not know the ins and outs of the law but it seems to me that companies should not be able to hand over individuals details without foretelling them that they will do so.

not gonna happen. coinbase is an MSB under tight AML/KYC regulations, and they are under the jurisdiction of the IRS regardless of where their customers reside.

regulated brokers are usually required to send their clients 1099s (which are also sent to the IRS). i think it's pretty likely that exchanges like coinbase will need to comply with these requirements in the future.

[stompix]

But what are their real purposes? We all know that they only want to make as much money as they can.

I dont understand what are their real purposes, probably most of those people who were moving $25,000 on the past, were those who were lucky and could buy bitcoin when it was less than $100-200 each bitcoin, and they wanted to sell it when it was probably $300 or $500, who knows?

Now that the price is very high, it doesnt mean that they are tax evasors, it is all the opposite, they want to make profit from that, and if they dont pay the taxes, they go to jail.

But not even 2 of 10 users from those are still using coinbase, who would be holding 300k in coinbase? nobody.

Do you have any statistics that would led you to believe there is nobody holding more than 300k in coinbase? Nor in Gdax?

Th real purposes are simple. You make a profit (revenue) it is going to be taxed. This is how it was way before cryptos.
But some lived with the impression that with BTC tax evasion season will open up. Not the case.

Furthermore:

Now that the price is very high, it doesn't mean that they are tax evasors,

The rules are simple, if you don't pay your income tax then what you do it is called tax evasion.
Funny how a lot of users praised the regulation of cryptos and how they are finding troublesome they have to obey the same laws they cheered.

It's no shock to see the courts ruling in the IRS's favour and against cryptocurrencies. I hope that somehow this can be fought off and such things can be overcome in the future, I do not know the ins and outs of the law but it seems to me that companies should not be able to hand over individuals details without foretelling them that they will do so.

Who ruled something against cryptos?
I really don't understand what is against cryptos at this point?
Treating them like commodities and making the users pay their taxes just as they do when trading commodities?
Why should I pay taxes on trading tomatoes and you trading bitcoins should be excluded ?

[Maveth13]

Name, birthdate, freaking ADDRESS and account activity? These are huge informations. At this point they have taken away the ability to be anonymous/pseudo-anonymous by using bitcoins. I'm sure their next step is to tax these people. Taxes on $20,000+ income is a lot of money, assuming they'd be taxed the same way as forex traders.

[HasHe]

That was really an expected move and no government would be ready to allow traders to go go without being taxed.It has only asked details of customers who have transactions more than $20,000 and i think that it would be a kind of relief for thousands of other customers who had very less amount of transactions.

[dhka]

I am no US citizen and know nothing about its tax policy, but to me it is clearly government wants some share of the profit, but it is pretty normal I guess

I'd rather see my government do that than speculation to ban or something, just accept new technology and adapt

[figmentofmyass]

That was really an expected move and no government would be ready to allow traders to go go without being taxed.It has only asked details of customers who have transactions more than $20,000 and i think that it would be a kind of relief for thousands of other customers who had very less amount of transactions.

it's a relief, but it's also a wake-up call. i think this whole IRS/coinbase fiasco was about shaking cryptocurrency traders into tax compliance. it was less about pursuing actual cases against traders. 2013-2015 at that threshold won't net that much tax revenue. this is about establishing precedent now and forcing today's traders in 2017/2018 into paying their taxes. if you're trading on coinbase in 2018 and not paying your taxes, you're in for a rude awakening a few years down the road.

that said, coinbase has been complying with IRS requests for years. you certainly can't trust them with your privacy, regardless of this case.

[South Park]

My question is what about those who used coinbase after 2015 what about those customers?

Simple, they are not included in this resolution, so for now they are safe, but prepare yourself, if you are a big bitcoin holder that has its bitcoin in coinbase then it is very likely the taxman is going to knock at your door to collect his share of the profits.

[eternalgloom]

This was to be expected, I mean if you bought coins at Coinbase and weren't expecting this, you've been pretty oblivious to all the signs on the wall imo.
They already lock your account for sending coins to addresses that they don't approve of, coin mixers or even casino's, just search on Google for stories.

If anything, I hope this will encourage more people to use decentralized exchanges, they aren't really too popular at the moment.

[Patatas]

Shouldn't this be in service discussion ? Why is coinbase being considered such an important part of bitcoin lol it is just an exchange.

This was to be expected, I mean if you bought coins at Coinbase and weren't expecting this, you've been pretty oblivious to all the signs on the wall imo.
They already lock your account for sending coins to addresses that they don't approve of, coin mixers or even casino's, just search on Google for stories.

Google ? All those links will get you back on bitcointalk.Despite of the fact coinbase works alongside NSA and the FBI,they heavily manipulate the prices of bitcoin.

If anything, I hope this will encourage more people to use decentralized exchanges, they aren't really too popular at the moment.

A good alternative to decentralized exchanges are peer to peer networks like localbitcoins.A little authority over the service but still better than sending user data to the governments.

[jerry0]

What other sites do this?  Only us sites right?  Do sites like gemini does this?

[Kronos21]

It will be a serious blow to the reputation. At a time when people used Coinbase for the exchange of bitcoins of such claims was not. It seems to me that the law should not be retroactive. Such laws should use the period since the signing of the law. As the protection of personal data? Man was not given permission to disclose such information.

[South Park]

That was really an expected move and no government would be ready to allow traders to go go without being taxed.It has only asked details of customers who have transactions more than $20,000 and i think that it would be a kind of relief for thousands of other customers who had very less amount of transactions.

it's a relief, but it's also a wake-up call. i think this whole IRS/coinbase fiasco was about shaking cryptocurrency traders into tax compliance. it was less about pursuing actual cases against traders. 2013-2015 at that threshold won't net that much tax revenue. this is about establishing precedent now and forcing today's traders in 2017/2018 into paying their taxes. if you're trading on coinbase in 2018 and not paying your taxes, you're in for a rude awakening a few years down the road.

that said, coinbase has been complying with IRS requests for years. you certainly can't trust them with your privacy, regardless of this case.

I think this is well, this was a cautionary shoot, the IRS is basically saying come to us and pay your taxes or we are going to go after you, so for all of those that need to pay their taxes please do it so you can avoid to have to deal with penalties or even jail time.

[bambazamba]

IRS has always had its eyes on Bitcoin . This was very likely to happen actually . With the massive increase of participants in the coinbase the transactions also increased . IRS  looks and seeks for one reason , a single loop hole that  may lead to some questionings on Bitcoin . Here are like 14,355 Traders . There will might be a proper investigation by IRS in this case .
This is very obvious that with the number of increase in investments and tradings in Bitcoin , the "potential" frauds and suspected transactions might also take place.

[anon516]

Can the decision be appealed? Or has Coinbase conceded now?

[BlackRock]

Should not effect many people as coinbase has already collected KYC documents and people who have bought should be very well aware that coinbase is based in US and will accessible to US regulators.Most of them have bought with tax paid money and may be holding bitcoin as investment and not for trading.Even if they are trading the must have paid taxes on profits.Even if they have not paid taxes,they will be subjected to penalty

[Kingofbitcoin12345]

This is the ultimate reason I’m not fan of Coinbase as it is centralized already.. I do have an account and used it for a while but if I have verified it then that must be the biggest mistake in my life.. In that alone I’m totally safe with this kind of privacy breach.. But still I condemn any kind of legislation or regulation this way if it was really not criminally associated with anyone.. Those must be exposed are illegally used bitcoin for criminal acts and that only be selective turn over of identity of a suspect..

[Harlot]

Some people here think that it is the government who is the one abusing their power here but its actually the government who have saved the day as the cryptocurrency traders are the ones who are getting away with big income without even being taxed. They are people who are being unjustly enriched by Bitcoim's features. Also a good job for CoinBase on having their profiles prepared.

[marky89]

Some people here think that it is the government who is the one abusing their power here but its actually the government who have saved the day as the cryptocurrency traders are the ones who are getting away with big income without even being taxed.

I guess the Bitcoin community really has strayed from its libertarian roots, eh? Now enforcing capital gains taxes on bitcoin investors is seen as "saving the day!" How far we've come in only a few years!

Personally, I don't understand why Coinbase and similar exchanges that are based in the US don't send out 1099s (to the IRS and to customers). Regulated brokers are required to do so. It's never been clear to me why these requirements don't extend to Bitcoin exchanges. I'm pretty sure that regulations will be passed which require exchanges to send 1099s if taxable transactions exceed a certain threshold.

This is the ultimate reason I’m not fan of Coinbase as it is centralized already..

I've been telling my friends for years: you should expect that any exchange licensed in the US will give your records to regulators. I remember Brian Armstrong saying something about wanting Coinbase to be "the most compliant" exchange in the space. Go figure.

[dylanbitcoin2]

Do they mean 20,000 active balance or do they mean if you purchase coins in coinbase at any time in 2015 your info is now sent to the irs?

I purchased 7 bitcoins in 2015 for $300 i think. so  $2100 worth....

now they would be worth over 70 grand!!!! so upset i know. but i been sold these on localbitcoins and i forgot my login and password to that site. so no proof that i sold them for only a few hundred....

confused if im rerpoted to the irs?? if i bought 7 bitcoins in 2015.. (they were worth less than 20 grand total. at the time)

[squatter]

Do they mean 20,000 active balance or do they mean if you purchase coins in coinbase at any time in 2015 your info is now sent to the irs?

I purchased 7 bitcoins in 2015 for $300 i think. so  $2100 worth....

now they would be worth over 70 grand!!!! so upset i know. but i been sold these on localbitcoins and i forgot my login and password to that site. so no proof that i sold them for only a few hundred....

confused if im rerpoted to the irs?? if i bought 7 bitcoins in 2015.. (they were worth less than 20 grand total. at the time)

My reading of the ruling is that you must have had $20,000 worth of transactions in any one year during the 2013-2015 period to be reported. Based on what you said, this doesn't affect you. And technically, even if Coinbase did give your info to the IRS, that info wouldn't prove that capital gains occurred since you didn't sell them on Coinbase.

That said, companies like Coinbase and Gemini work closely with law enforcement and regulators and they are tightly regulated since they are based in the US. They comply with individual requests from the IRS all the time. So you should always be ready for your exchange activity to be given to the IRS.....