The IRS Just Declared War on Bitcoin Privacy

The Internal Revenue Service has filed a “John Doe” summons seeking to require U.S. Bitcoin exchange Coinbase to turn over records about every transaction of every user from 2013 to 2015. That demand is shocking in sweep, and it includes: “complete user profile, history of changes to user profile from account inception, complete user preferences, complete user security settings and history (including confirmed devices and account activity), complete user payment methods, and any other information related to the funding sources for the account/wallet/vault, regardless of date.” And every single transaction:

All records of account/wallet/vault activity including transaction logs or other records identifying the date, amount, and type of transaction (purchase/sale/exchange), the post transaction balance, the names or other identifiers of counterparties to the transaction; requests or instructions to send or receive bitcoin; and, where counterparties transact through their own Coinbase accounts/wallets/vaults, all available information identifying the users of such accounts and their contact information.

The demand is not limited to owners of large amounts of Bitcoin or to those who have transacted in large amounts. Everything about everyone.

Equally shocking is the weak foundation for making this demand. In a declaration submitted to the court, an IRS agent recounts having learned of tax evasion on the part of one Bitcoin user and two companies. On this basis, he and the IRS claim “a reasonable basis for believing” that all U.S. Coinbase users “may fail or may have failed to comply” with the internal revenue laws.

If that evidence is enough to create a reasonable basis to believe that all Bitcoin users evade taxes, the IRS is entitled to access the records of everyone who uses paper money.

Anecdotes and online braggadocio about tax avoidance are not a reasonable basis to believe that all Coinbase users are tax cheats whose financial lives should be opened to IRS investigators and the hackers looking over their shoulders. There must be some specific information about particular users, or else the IRS is seeking a general warrant, which the Fourth Amendment denies it the power to do.

Full article: The IRS Just Declared War on Bitcoin Privacy | Foundation for Economic Education

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