Coinbase Fights Back Against IRS Bitcoin Summons
Coinbase practically left it until the last minute to contest the summons requiring the Bitcoin exchange to disclose its US customer base to the IRS.
Last November, the [geolink href=”https://www.usafriendlypokersites.com/irs-files-coinbase-reveal-list-us-customers/”]IRS asked a Federal Court[/geolink] for permission to file a summons forcing Coinbase to disclose its database of US customers. The motive for the summons was to identify US residents who had failed to declare profits from Bitcoin transactions between 31 December 2013 and 31 December 2015. No decision was expected until next month, but things escalated quickly.
On 30 November, Judge Jacqueline Scott Corley – a magistrate judge from the Californian District Court in San Francisco – granted the request for a subpoena. Almost immediately, one of Coinbase´s customers – lawyer Jeffrey Berns – filed a complaint against the judgment, claiming that the subpoena was too broad because it included customers like him who had done nothing illegal.
A hearing to resolve Berns´ complaint was scheduled to take place this week. However, Coinbase has now entered the fray and filed its own motion claiming that it should be allowed to intervene in the proceedings. The Bitcoin exchange wants to present its own
legal and factual arguments in opposition to the summons and – because they are not ready yet – has requested a postponement until March.
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Coinbase CEO: A Phone Call Would Have Done
To explain Coinbase´s position to its millions of customers potentially affected by the subpoena, the company´s CEO – Brian Armstrong – issued a statement on Twitter´s publishing platform “Medium”. In the statement, Armstrong wrote that the company had in the past complied with subpoenas from the IRS relating to individual accounts, but this one requesting details of all its customers was overbearing.
Armstrong wrote that the company and the IRS had the same compliance objective
for all US users of virtual currency to pay their taxes, but argued the summons was the wrong way to achieve this objective. He suggested forcing the handover of gigabytes of unstructured data was an unproductive way of addressing IRS concerns about under-reporting and non-declaration, and it would have been more conducive to a mutual working relationship if somebody from the IRS had given him a call.
In relation to the privacy issues raised by the subpoena, Armstrong wrote:
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.
Armstrong concluded his statement by commenting there were many better ways in which Coinbase and the IRS could work together to create a sensible reporting mechanism. Having already stated that a protracted legal battle would cost the company up to a million dollars, he wrote that the legal action was bad for Coinbase, bad for the IRS and – due to the unnecessary revelation of private information – bad for many US citizens.
What Does the Action Mean for US Poker Players?
Probably not a lot. When permission was first sought to issue the subpoena in November 2016, David Utze – a senior revenue agent at the IRS – gave the indication that the service was trying to uncover significant under-reporting by multi-million-dollar corporations. Furthermore, due to Coinbase´s unwillingness to transact with unregulated offshore poker sites, many online poker players have used third-party wallets to make deposits and withdraw funds from their accounts – not necessarily converting their Bitcoin back into fiat currency through Coinbase´s exchange service.
The likely outcome of the action will be a compromise solution – Coinbase voluntarily handing over records for organizations and individuals with Bitcoin transactions above a certain value. Nonetheless, any US online poker player that won a significant amount of money between December 2013 and December 2015, exchanged their Bitcoin winnings for fiat currency via Coinbase´s exchange service, and failed to fully declare their profit from online poker, is advised to seek professional legal advice.