Crypto exchange Kraken seeks San Francisco court intervention against IRS demands for user data amid growing regulatory scrutiny.
In an effort to protect its customers’ privacy, crypto exchange Kraken has taken a stand against the United States Internal Revenue Service (IRS) by petitioning a federal court in San Francisco to intervene on the matter of disclosing sensitive user information. Kraken claims that the IRS’s demands are part of an “unwarranted treasure hunt” and seeks the court’s support to push back against these requests, according to a Bloomberg report.
The impetus for Kraken’s legal action comes from an IRS summons issued in February, which sought additional user data to identify Kraken accounts involved in cryptocurrency trading of at least $20,000 per year between 2016 and 2020. Kraken has pointed to the 2017 Coinbase case as a precedent, arguing that the tax agency’s demands exceed the limits set by U.S. District Judge Jacqueline Scott Corley.
In the Coinbase case, Judge Corley ruled that the summons sent to over 14,000 Coinbase customers was not overly intrusive, as the IRS had valid grounds to investigate taxpayers who might not have disclosed their Bitcoin profits. Kraken’s attorneys, however, contend that the IRS’s current demands for user information surpass the acceptable level of intrusion established in the previous case.
By opposing the IRS’s demands, Kraken joins Coinbase in the struggle against the escalating regulatory pressure from American authorities.
Coinbase’s Battle with the SEC Over Crypto Staking Services
Coinbase is simultaneously facing its own legal challenges with the U.S. Securities and Exchange Commission (SEC) concerning the offering of crypto staking services. The SEC argues that Kraken and Coinbase’s staking services are in violation of securities law. Although Kraken has settled with the SEC for $30 million over providing staking services, it remains determined to fight the IRS in court.
The mounting regulatory scrutiny on cryptocurrency companies in the United States has become a major concern for industry leaders. Moreover, CEOs like Brian Armstrong of Coinbase and Jeramy Allaire of USD Coin issuer Circle have cautioned that the increasing opposition from regulatory bodies might force burgeoning crypto companies to seek more favorable jurisdictions abroad.
The ongoing disputes between Kraken, Coinbase, and US regulators underscore the urgent need for clearer guidelines and regulations within the rapidly expanding cryptocurrency sector. Hence, collaborative efforts between regulators and industry players are vital in establishing a transparent and comprehensive regulatory framework that fosters innovation and safeguards consumers and investors from potential risks tied to digital assets.