IRS May not Get as Much Customer Data From Coinbase as Requested

The IRS intends to lessen the amount of customer data it originally wanted to siphon from Coinbase. Ongoing negotiations between Coinbase and the IRS have yielded concessions on part of the IRS legal team. A trial attorney for the Department of Justice, Amy Matchison, recently said the IRS would narrow their specific data request from Coinbase. 

Also read: Former Barclays Chief Believes Blockchain and Cryptocurrencies Could Make Banks Irrelevant

Matchison came to this consideration as a result of several anonymous Coinbase users who decided to fight back against the IRS. These users came to vouch for themselves as well as Coinbase. They want to intervene and oppose government action against Coinbase users. They argued that an unnecessary and over-broad information grab would result in undue harm to many people.

An article from the Recorder clarified:

“Coinbase account holders were seeking to intervene in the matter to oppose the government’s request for the information. Lee Weiss of Berns Weiss, who represents two John Doe account holders, argued that his clients have interests that are distinct from Coinbase’s and that it’s their information that’s at stake.”

IRS Loses Private Documents, Gets Hacked Too Easily

In a June 22 “Motion to Intervene” court document, the plaintiffs mentioned that all the excess personal information requested by the IRS could easily be retrieved by hackers. This would compromise personal account information from Coinbase users. The document cited the IRS has not been careful with other people’s documents, and they lose sensitive information to nefarious entities too often. The document clarified:

“Further, the breadth of the summons, which seeks substantial personal information that is not at all relevant to tax compliance issues, and which could expose these clients to significant risk of having their identity and funds stolen by hackers who have succeeded previously in hacking the federal government, including the IRS, numerous times, makes it easy to conclude that the Government is engaging in abuse of process.”

Initial Data Request from the IRS

Initially, the IRS requested a plethora of data from Coinbase. They wanted everything from vault information, account/wallet holdings, and monetary transfers via banks wires, Paypal transfers, and other money transmittal services via Coinbase.

Much of the data they requested, however, was information they did not necessarily need to access for tax evasion or other financial crimes.

The IRS also wanted IP addresses, users settings, correspondence with Coinbase representatives; including written letters, emails, facsimiles, telegrams, and even oral conversations. The IRS basically wanted to the master keys to the Coinbase castle.

Coinbase Rejects Over-Broad Information Request

From the beginning, Coinbase publicly rejected these over-broad and intrusive information grabs from the IRS. CEO Brian Armstrong, said in a January 14 personal blog, that he is committed to compliance. However, he implied the most recent subpoena by the IRS went too far. He articulated his concern for the situation:

“Asking for detailed transaction information on so many people, simply for using digital currency, is a violation of their privacy, and is not the best way for us to accomplish our mutual objective. If the IRS were to approach Citibank, Fidelity, or Paypal and ask them to turn over all customer records, they would rightfully push back. And I feel we have the same obligation to do so.”

How much information from Coinbase do you think the IRS will acquire? Will Coinbase’s defense work? Share your thoughts below!

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