Bitcoin exchange processor likely to fight IRS summons -legal analyst – Reuters


Nov 20 The largest Bitcoin exchange firm in the
U.S. is likely to oppose a summons from the Internal Revenue
Services (IRS) seeking the records of all customers who bought
virtual currency from the company from 2013 to 2015, a lawyer
familiar with the case said Sunday.

On Friday, Coinbase, the country’s largest Bitcoin
exchanger, acknowledged it had received a summons sent by the
IRS asking for information on its users. Chris Padovano, a
lawyer and the founder of Decentralized Legal, said he expects
Coinbase to turn back the government’s request.

“It’s very likely, considering their customer base and the
philosophical base of most of their users, that Coinbase will
challenge this summons,” Padovano told Reuters by telephone. “I
think that they need to keep their base somewhat appeased.”

Padovano does not represent Coinbase, but does work with
Bitcoin exchange firm Coinfund.

In responding to the IRS’s summons, which was reported by
the New York Times and financial blog ZeroHedge on Friday,
Coinbase cited concerns with the wide-ranging nature of the
government’s request.

“We want to work with law enforcement – that’s generally our
policy,” the company’s head legal counsel, Juan Suarez, said
Friday. “But we can’t tolerate sweeping fishing expeditions. We
are very concerned about the financial privacy rights of our

The summons said that an IRS agent recently found three
cases involving Bitcoin users who used the cryptocurrency to
evade taxes. Two of those cases, the summons alleges, involved
Coinbase customers. Additionally, the I.R.S. stated that it
knows that Coinbase users have not complied with federal law in
the past.

While the case is likely more nuanced, the government may
have overreached with its request to gain access to all of
Coinbase’s users based on the actions of two, Padovano said.
Still, he’s unsure whether there could be a case for the IRS to
demand that Coinbase release at least some of its users’

“There are two questions here. One is whether or not (the
IRS has) reasonably identified a class of individuals and has a
reasonable basis for believing that all U.S. customers for
Coinbase from 2013-2015 may have failed to comply with laws
based on these three users,” he said. “Two is whether the
information sought by IRS is not available from any other
reasonable source than Coinbase.”

(Reporting by Dion Rabouin; Editing by Sandra Maler)


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